Saturday, December 12, 2009

Hyderbad real estate set for steep fall

As speculators abandon their bets, end-users will finally get a chance to realize their dream of owing their own house. Investors with multiple properties better bail out now, else risk a steep erosion in prices. Times of India articles normally try to spin any story towards a bullish angle, however this time they are helpless.

Hyderabad's real estate sector was in a state of shock on Thursday, just hours after the Centre conceded to the demand for a separate

Telangana state. Speculating that the move would further dampen the already crippled industry, realtors were seen making their own calculations about the future of their business in the city. Apart from a few optimistic voices, most realtors opined that the T decision would spell doom for real estate in Hyderabad and result in a steep fall in the property value.

"We will go back at least by five years in terms of growth," said Khaja Asif Ahmed of Stellar Project Management Consultant, adding, "It will take at least two to three years for the political unrest to settle and till then no investor from outside would put his money here." According to his prediction, the industry, which is still battling the recession ghost, is set to hit a new low over the next few months.

City realtors say that Hyderabad, as part of Telangana, would also disrupt the flow of sentiment-driven investments. "So far people from all over the state invested in Hyderabad because of its status as the capital of Andhra Pradesh. But if it becomes part of Telangana, people would think twice before picking up property here," said a Kukatpally-based realtor Madhusudan admitting that it would indeed be a long haul before the sector gains momentum. "Until a clear separation takes place, there will be no new investments," Madhusudan said.

A common sentiment that seemed to be riding high among most players from the sector was that of ‘protecting Hyderabad' from the turmoil by declaring it as the joint capital of two states. "Our fear of stagnation in transactions (purchases) can be best addressed through this move. That way the value of properties in the city would remain unaffected and investors too would feel secure," said Ashwin Rao, director, Primus Developers. Though Rao is one among the few optimistic builders who feel that the industry would be back on track, only after an initial glitch of a few months, he says that the common capital stand would be ideal to arrest the slump in the realty business.

8 comments:

Anonymous said...

Trash IPOs

14 Dec 2009, 0102 hrs IST, Dhirendra Kumar

As a potential investor in the real estate sector, you shouldn’t be reading any broker or analyst reports, nor should you be reading ads or articles in the media. Instead, you should be doing some research yourself. Just find out the officially-quoted prices for some of these IPOing (or about to be IPOing) developers’ properties. And then, try and make some enquiries about the same properties pretending to be an actual buyer. Generally, you will discover that the real prices are a fraction of what is claimed publicly. Or in some cases, you may also discover that there are no real price quotes because no one is even pretending to sell properties because no one has any expectations of the underlying projects being executed in any realistic timeframe.


Almost without exception, the coming realty IPOs are desperate rescue missions, which seek to use the collected funds to replace some of the masses of debt that they’ve taken on. And almost without exception, the IPO funds will do nothing for the basic commercial viability of the products that these companies are supposed to produce and sell.


For historical reasons, there is now a fundamental design flaw in the real estate sector in India and this will take a long time to work itself out. For the active trader, there may be opportunities in riding realty stocks up and down the news cycles in the secondary markets. But for the serious investor, realty IPOs do not even begin to make sense.

shailesh said...

Rs 10 crore spent on event that no one understands

Funny. It seems like Vacation on Business trip expense.

Anonymous said...

Recession Ends for Summers: Anyone Else?

Peter Morici

December 14, 2009

White House chief economic advisor Lawrence Summers has declared the recession over, but as with most things economic, the opinion you get depends on who you ask.

Seven million families are behind on their mortgages and at risk of foreclosure , and 25 million Americans wanting full time work can’t find it. I doubt many of them would share Mr. Summer’s rosy assessment of the business climate.

In March, Federal Reserve support for mortgage financing is scheduled to end , thirty-year rates are likely to rocket past 6 percent, and the risk of a second housing market collapse and double dip recession becomes real.

shailesh said...

How to Rule India: Break It Into More Pieces?

Anonymous said...

Real estate sector is a bit like Dubai...it's not doing any sales. But its borrowing money through QIP/FCCB and IPO.

Which means that they are selling away their companies bit by bit.

At the same time Indian management is known for its inefficiencies..so its no wonder that as their end days are coming near they are traveling across the globe to discuss things which are not really relevant and can be discussed as easily at home.

I think the white house is also celebrating too early. They threw trillions at the recession, they have got a temporary respite and that is all. Sooner or later the world will resume its disorderly decline.

Finally, splintering India will drive up corruption and bureaucracy and choke India's economy. People demanding little state are trying to create more fiefdoms and creation of more Madhu Koda's

Shriniwas K said...

India is the Land of Chors. Builders got millions of rupees from Govt. in grants for affordable houses. Instead of selling these to the people in need, they sold it to greedy brokers. That to only robs taxpayer money, but totally destroys the concept of affordable housing.

Same thing is done by politicians in Maharashtra and Karnataka (and maybe other states) in education sector. First they took huge land grants from government (from us taxpayers) for educational institutions but they run colleges for sole profit with seats being auctioned off to kids of other thieves who either cheat on taxes or graft government funds.

I think its time for Indian population to rebel against this thievery. But alas
India as a nation is built on a foundation of salt and sand. We stupidly yell unity in diversity etc etc. But the values that unite us are very weak almost non existent. We need a strong constitution and strong values as a nation. Just because we are better than Pakistan and free-er than China does not make us a nation.

There is no point living in or dying for a nation not built on the values you and the majority in the nation hold as paramount.

-------------------------------
For RE - I think prices for end users will never fall like they did in US (builders and investors wont let it happen). In India, there is a genuine demand from working class professionals in every city. The moment prices hiccup like it happened in 2008 end to 2009 mid, there are many buyers who take the bite. Except for companies like DLF Unitech etc who are not selling to buyers/end users but to brokers and speculators, every other builder (who actually sells to buyers) is going to make money on back of the looming defaults of these big RE players.

The tipping point is awaited. As long as people are not buying from brokers and dont fall for the trap such as 'only few flats remaining' or 'all flats sold out in 48 hours crap', they will do fine. The real fools are those who think that houses are short in supply. India has huge housing inventory. Its our burgeoning baby machine family system that is at fault for this mess.

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