Friday, April 09, 2010

Realty check: Rising rates thwart home buyers' plans

The bubble grows bigger day by day. Most buyers are priced out as the flats are sold to investors or with folks with pots of black money. I'm sure the journalist who wrote this article is facing the pinch as well. 13000 is Andheri is 3 times the rate in 2006. Add to that the usual bogus built-up rate the sq/ft rate is over 18,000. Just rent the same property for 30,000 rs and enjoy it. One blogger asked the opinion of SS and BB on Bangalore real estate. I would say that Bangalore real estate is priced right and if you have need an apt you can get one from 40L onwards though you might have to goto the outskirts for that. Apartment sizes are generally larger then Mumbai and it is not uncommon to find rates in the vicinity of 3,000-4,000. Also the built up loading is roughly 20%, unlike the 40%+ loading applied by the Mumbai crooks

DNA reports


Mumbai: If the projects displayed at the annual property fair by the Maharashtra Chamber of Housing Industry are any indication, purchasing a flat will be a daunting task for home buyers this year as well.

Buyers will have to contend with property prices, which have almost doubled, and a dwindling stock of ready properties in “affordable” areas beyond Kandivli in the western suburbs and Panvel on the harbour line.

Take for instance Athena and Astraea buildings being constructed in Rustomjee’s Urbania project near Majiwada Junction at Thane. In a year’s time, the price of the project has increased from Rs4,000 per sq ft to Rs6,143. Similarly, Gundecha Symphony in Andheri (West) has increased rates from Rs8,000 per sq ft to Rs13,000.

The rates were a huge disappointment for visitors. Lillu Asurlekar, a prospective home buyer, said, “I am looking for a flat in Andheri or Goregaon, but the prices are very high. I will now have to go beyond these areas. How can anyone shell out Rs4,000 a sq ft for a flat in Panvel?”

Barring Everest Developers, who offered a discount of Rs100 per sq ft, there were no discounts offered by any top ranking developers. In fact, for the first time, developers like Lokhandwala and K Raheja Universal did not participate in the property fair.

34 comments:

shailesh said...

Property prices drop in some pockets of Mumbai

For many media companies, headlines that point to property prices rising even further, usually translates into increased advertising revenue. In some cases, they have equity deals with realty companies which include an agreement to project reports that favour these companies. A reader has written to point out that some of these headlines sound like “quotes from the builder.”


A few developers were hiking prices in Mumbai over the past three months, but inventories have been piling up. Ergo, developers who are sitting on these inventories are either lowering or freezing their prices.

The Nahar Group is a case in point—it has reduced prices in its project ‘Nahar’s Amrit Shakti’, situated at Powai in central Mumbai. A two-bedroom hall & kitchen (BHK) of 1,150 sq ft is retailing at Rs7,800 per sq ft—the price was Rs8,500 per sq ft one-and-a-half months back.

K Raheja Corp is launching two new towers at ‘Raheja Vistas’ (also at Powai), at Rs7,900 per square feet. The developer has no plans to increase prices.

Developers who are planning to come up with new projects are also not increasing prices, but are trying to keep them at reasonable levels. According to Ressex data (released by real-estate advisory firm Liases Foras), the number of units sold in Mumbai went down by 25% in December 2009 compared to September 2009.

shailesh said...

Over-supply to hit premium housing

The middle and affordable category of housing has robust demand. This would continue to drive growth. Oversupply will hit the premium segment, where prices are still very high, but there are very few buyers. For example, at Saket in New Delhi or in south Mumbai, rates are in the range of Rs45,000 per sq. ft and Rs70,000 per sq. ft, respectively. Rates in the high-end housing category have already reached their peak in Mumbai.

shailesh said...

Another price correction may be in the offing in realty space

NEW DELHI: The prevailing real estate rates in Mumbai and its suburbs indicate that the sector is headed for another bubble in prices which may
not be sustainable. In most of the prominent localities in the city, the home prices are now much higher than the peak prices in 2007. For instance, take the posh Worli and Prabhadevi areas of Central Mumbai.

A flat at one of the properties being developed by Sheth Developers at Prabhadevi is quoting a price of Rs 50,000 per square feet, up from around Rs 35,000 a sq feet two year ago. Some other projects like Planet Godrej, Raheja Vivaria and Ashoka Towers in South Mumbai are again closer or higher than their peaks of 2008.

The fact that salaries are yet to scale pre-slowdown levels and that realty companies are not taking up any aggressive expansion plans suggest that at a correction may be in the offing. And with teaser home loan rates coming to an end may further add to inventory pressure.

Anonymous said...

The problem with a bubble is that there is no predicting when it will burst. Its will prolong longer than you have patience for and when it bursts it could be deeper than you care to hold out. The problem with the Reality in Mumbai is that slowdown created a slight deflation but the bubble was intact and it has continued its expected trajectory.

There are "shortages" but the problem with this bubble is that there is lot of holding stock with brokers.....there is no accounting how much. Its the Crude Oil Peak prediction - no one ever knows when it will run out....but one day it will and we will never have an alternative.

Global Poverty is on its way.

Buy if you can, sell if you can. Become comfortable wherever you want to be...'cos the future is not bright.

Anonymous said...

Hey I stareted following this blog in 2006 . i just kept my 40 lack rs. Now I am not able to buy anything in Navi Mumbai. My plan was to buy at Cadel Road or Prabhadevi as price were supposed to b 25% of that times ( 2006a) value, Insted of that it is now 200-300% of that value.

So all the visionaries till what time i'll wait?

shailesh said...

Anon 11:26

I don't think this blog existed in 2006. Also this blog did not stop anyone from buying. You did not buy, because 40 lakh in 2006 did not give you what you wanted.

The blog is for open communication. Everyone is titled to their opinion. If you were so ardent follower of the blog, you would not post Anonymous. Get google ID and use it.

Anonymous said...

I had been an ardent beleiver in correction over the last coupla years.

Things could turn for better/worse after May/June as greek fund raising and british elections would have come to an end. An unfavourable outcome in these events could begin a round of after effects which would be a mini-september 2008 and that would irretrievably handicap RE industry worldwide for the next few years.

At this moment in time,things look like they might go exactly as we in this blog wish to.

S.G

Kanekar said...

@ S G
Please enlighten us how the Greek fund raising and British elections will have a effect on the real estate business in India. I assume that you are living in Europe and trying to see a parallel between EU business and that in India.
There is a no doubt that there is a huge influx of money into India. These funds belong to Indians who hoarded in safe heavens. Now that the confidence in European banks is slowly dwindling, these guys are finding ingenious ways to bring back the money and invest in India. Currently the area of investment being real estate. With the growing population , they know for sure, this sector will flourish.

The one and only way to curtail the illegal activities is to resort to methods used by Indira Gandhi government. That is to fix a fair price to homes and if there is proof that an illegal transaction has taken place, confiscate such asset compensating the investor the paper value and put it for public auction

Having stated this, I know that this could never happen as the government machinery itself is deeply involved in these illegal activities.

Kanekar said...

An NRI friend of mene purchased a apartment in Versova, Andheri. He paid aroud 1.6Cr for the flat measuring 960 sq.ft. The entire payent is made in two cheques from his NRI accout. One cheque for the amount of 80 laks to the buider towards the cost of the apartment. The other cheque of 80 lakhs was drawn in favour of some company specified by the builder.

Now, my question is why the IT does not want to / can not trace the 80 lakhs illegal payment. This shows a nexus between bank/IT dept/ the other govt sections like land registration, revenue .. etc.

This is what is happening and we the bloggers are dreaming of a bubble.

Now I just wonder that the bubble is our own imagination

Anonymous said...

I have been reading this blog since last couple of years and been hoping that the indian real estate bubble bursts one day. By any parameter, the real estate in Mumbai is overpriced and any normal person earning even 7-8lac p.a will have a tough time buying a decent house.

I would name 4 key reasons for this bubble:

1. FDI and PE money entering real estate from 2004 onwards
2. Flood of real estate IPO's (over 30 issues since 2004) mean cheap money (equity) for real estate cos.
3. Growth in retail real estate loans (upto 85% of property value being loaned).
4. Black money.

Never before has so much money been flooding the sector giving rise to asset appreciation. Last year was a great time to buy given that most real estate cos were sitting on huge debt and no money to develop lands or fund existing projects. However with the subsequent QIP's and IPO's and debt restructuring, their liquidity has sharply improved.

Real estate cos still have a lot of debt but not enough to cause distress sales. Maybe this bubble will get bigger before it finally pricks. Im hoping that this bubble continues and real estate cos again pile up debt for land buys and then we can have the final end game.

Anonymous said...

I have been reading this blog since last couple of years and been hoping that the indian real estate bubble bursts one day. By any parameter, the real estate in Mumbai is overpriced and any normal person earning even 7-8lac p.a will have a tough time buying a decent house.

I would name 4 key reasons for this bubble:

1. FDI and PE money entering real estate from 2004 onwards
2. Flood of real estate IPO's (over 30 issues since 2004) mean cheap money (equity) for real estate cos.
3. Growth in retail real estate loans (upto 85% of property value being loaned).
4. Black money.

Never before has so much money been flooding the sector giving rise to asset appreciation. Last year was a great time to buy given that most real estate cos were sitting on huge debt and no money to develop lands or fund existing projects. However with the subsequent QIP's and IPO's and debt restructuring, their liquidity has sharply improved.

Real estate cos still have a lot of debt but not enough to cause distress sales. Maybe this bubble will get bigger before it finally pricks. Im hoping that this bubble continues and real estate cos again pile up debt for land buys and then we can have the final end game.

Anonymous said...

@Anonymous 17:10 AM ..Good Analysis..!

Anonymous said...

And to add to your analysis, the Govt. gave massive stimulus in the form of doubling the salaries of Govt. employees, cutting down excise duty, another 100 billion USD for infrastructure and above all kept interet rates historically low. Low interest rates has caused a lot of easy money to flow in the economy.

I wonder if India is doing so great why doesn't the Govt. stop the stimulus.

Also, people may not be aware but the Govt. is borrowing massive money from outside the country to pay for the salary increases and they are also trying to sell stakes in PSUs like NTPC to raise money.

I wouldn't be surprised if India is also on the list of countries like Greece and Dubai due to major debt.

RE in India is not sustainable and will crash. The collusion can try to prolong it but not prevent it.

Anonymous said...

How Dubai’s $14 billion dream to build The World is falling apart
10th April 2010 UK Mail

Of Dubai’s absurd dreams, none has failed more spectacularly than The World - 300 man-made islands sculpted from sand; only ‘Greenland’ has been built on. And as Adam Luck reports, the $14bn dream has left a trail of death, debt and deception.

http://www.dailymail.co.uk/home/moslive/article-1263987/How-Dubais-14-billion-dream-build-The-World-falling-apart.html

Anonymous said...

“Iceland” is in foreclosure.
“America” is paying their mortgage with credit cards.
“Afghanistan” is under daily attack for no reason.
“China” is billowing black smoke from the outdoor grill.
“North Korea” is inhabited by a pack of wild dogs.
“Greece” is sinking.

Anonymous said...

“Mexico” is having the neighborhood narco war.
“Spain” is having 19% unemployment.

My goodness, at least Wall Street is on solid footing. I’d hate to have Wall Street setting up a 70% rally with 40% of the trading volume that was in 2007. That would mean “a head fake” crash is coming.

Anonymous said...

@Anonymous 9:39 onwards

Do us a favor. Cut the crap and shoot the point

Anonymous said...

kanekar,
NRI's are equally responsible for inflating this bubble...RE speculators actully do nothing but speculate, those stupid NRI's paid for this speculation and made the builder-politician nexus strong...
pass on few swear wordsw from me to your NRI friend who paid half the money in black...it is outrageous.

Anonymous said...

It would be really hard for NRIs to get the money back to their countries in case they sell those properties. Firstly 70% would be black and how would they prove they got it from. Secondly, all capital gains would be taxable. Thirdly, even if they do a only white deal, they will have to jump through hoops with RBI to get foreign exchange.

Bad investments.

Anonymous said...

Dreamers!
Dream on
There is no bubble which will bust
It is all wishthinking hallucination of failures
The bubble will bust when you stop reproducing like rats
When you stop the FII from investing in INDIA
If you do that they will get out and you will loose jobs
If you elect right leaders and not criminal goons like you
Realty knows in INDIA only one way
UP
UP
UP
UP
and UP
If you want to wait for 10 years to live forever in your rented house go on and enjoy
this is just frustation bla bla bla
You can't compare america eu and INDIA
INDIA will rally forever as long as it allows inflow of fund which corrupt politicians will never stop
ha ha ha ha

Anonymous said...

Anon @10:22

To the point:

India is sitting on an economic timebomb which is going to explode anytime. It will bring tears to a lot due to massive excesses and bubbles. Believe it or not.

Ripley.

Anonymous said...

Ripley :-) bears like you are nailed down aren't they?
So does that make you wishthink?
Great
Go ahead nobody stops you
Timebomb ticking
Or was the stocks and realty going up put a bomb in your brains stupidity of imagination of bubble burst
Dream on

Anonymous said...

Hey guys
I trusted all these bla bla bla of bubble bust
But one advisor and few economist friends told me to invest.
When world was fucking around waiting for prices to drop
I invested in realty and shares. Today my money is 6 times than it was in 2007 and I am proud holder of house a land and an apartment all of which are being asked from me at 300% price
waiting?
What makes you qualified to run this blog?
Are you economic expert?
You are just getting our your mental pollution here and confusing people
who are losing money playing bear

Anonymous said...

The speculators and builders are playing tricks. In Thane one builder advertised flats for 6500 sq.ft, 30% black and 70% white. Few of his flats were sold but he continued advertising that few were left. But there were hardly any takers. After a few weeks builder brought down the price to 4500 sq ft, but the black portion became 50%. Excited buyers thronged the project and almost all flats were sold in a months time. Those wise guys who bought have realised that the whole exercise was a trick played by the builder, as they are discovering that the quality of construction is extremely poor and cracks have started developing in walls. The price markdown was just a sales gimmick.

Buyers, beware of the tricks

Anonymous said...

Anon 12:17, 12:22:::

What the fuck are you doing on this blog. Why don't you enjoy your riches that are on paper.

Somewhere in your mind you know all that is happening is Too Good to be True and that's why you visit here to convince yourself that you are right in your investments.

I would suggest that you buy some more of RE and enjoy your riches. Don't screw around here or tell people here that RE is not going down in India.

Anonymous said...

April 9 (Bloomberg) -- India’s central bank may raise the benchmark interest rate to as much as 5 percent as it unwinds monetary stimulus amid an economic rebound, an adviser to Prime Minister Manmohan Singh said.

“We are getting off the easy money policy,” Saumitra Chaudhuri, who is also a member of the planning agency that sets India’s development agenda, said in an interview yesterday. “The crisis period which caused this extraordinary policy to be in place is over.”

The Reserve Bank of India’s benchmark rate would be considered to be at a “neutral” level “between 4 percent and 5 percent,” he said, adding that the timing is best left to the central bank. Improved consumer sentiment has necessitated a return to “normal monetary policy,” the adviser said.

Central bank Governor Duvvuri Subbarao on March 19 raised borrowing costs for the first time since July 2008 to cool inflation, increasing the reverse repurchase rate by a quarter point to 3.5 percent. Policy makers from Australia to Malaysia are withdrawing monetary stimulus as Asia leads a recovery from last year’s global recession.

Anonymous said...

I have seen some reports, and photos, suggesting that China is keeping its economy booming by constructing empty malls, empty apartment buildings, and even an entire empty city. Same could be true for India too. Here is an example:

http://tinyurl.com/y3yf4kb

This is not going to end well. At all.

Anonymous said...

RE in Canada: My story::

My parents (mostly) own a house downtown which they purchased in 1995 for $170k which was roughly the bottom of the market after the early 90s recession - the last real recession here. It still the old wiring and plumbing and had a poorly finished basement.

A very similar house directly across the street sold about 5 years ago for $380k. While there the owners did a lot of work on the house (new kitchen, hardwood floors etc). They just sold the house a short while ago. The asking price was 525k. There were a lot of lookers.

The selling price was $609k. This is a ~1500 sq. ft semi-detached 80 year old house which still has some knob-and-tube wiring in it.

It truly is an insane thing to behold.

Anonymous said...

I have been reading this blog and was with opinion that real estate bubble will burst. but now i doubt.

as i am from IT industry and from bangalore, people are changing companies with a hike in salary avegare 30%, and some cases 100%.

Now where will you think this moeny will go ?

Vik said...

I have been observing this salary hike trend in Bangalore of late and people are raking in big hikes when they switch jobs. Bangalore prices on a relative basis are very low compared to Mumbai. In Mumbai the shortage is artificial and created by the builder-black money investors nexus. Non IT folks are going to get priced out of Bangalore. There is no doubt this will happen. Just when other industries were playing catch-up, MNC companies are attracting Indian IT company employees with these steep hikes

Anonymous said...

In Bangalore there is still a fear of job security among IT folks. Today I read in some newspaper that India will see about 15% pay hikes this year. My MNC company is giving a hike of 15% only to top 5% and the rest get 4%-8%. And this is happening after 2 years of no pay hike. So all this crap of 15% pay hikes sounds too good to be true. And some of the laid off people are yet to find jobs. Lateral hiring is also picking up but at a slow pace and not too many are keen to switch. And these are the guys who make heavy investments in houses. Housing will definetly not pick up in bangalore for sometime.

Anonymous said...

Anonymous 7.01

In Toronto suburb a delux 3 b/r apartment with all amenities like central air, indoor swimming pools, vast tract of greenery etc etc cost around $200,000 which is around 90 lakh indian rupees. For the same amount you may get a cramped apartment in Mumbai suburb surrounded by filth.

It would take India few centuries to reach the current canadian living standard. So don't even think of making comparisons.

I live in Mumbai but had the opportunity to visit various canadian cities as I work for an airline

rajni sharma said...
This comment has been removed by the author.
Soltan Shan said...

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