Friday, July 23, 2010

After the engineered price boom, it’s raining discounts in real-estate

Article Link

"Property prices have started showing correction as sales are not happening. After the first quarter of the current fiscal, property sales are down by around 15% in Mumbai. End-users have disappeared from the market," said Pankaj Kapoor, founder, Liases Foras, a real-estate research agency.

Mumbai is expected to report lesser volume of real-estate transactions over the next six months, according to industry experts. "We are going to see lower volumes of transactions in the next six months compared to the past six months, if prices do not come down," said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.

If the current trend of discounts by developers is any sign of things to come, a much-belated correction in property prices in Mumbai might finally happen. Prices of various real-estate properties - both residential and commercial - had shot up by 30% in a few pockets of Mumbai over the past six months.

27 comments:

Anonymous said...

This is nothing. Due to inflationary pressures, the RBI will have to raise rates at a much faster pace. Try getting a loan from any bank for more than 30 lakhs and see what interest rate they charge you. Then, wait for six months and see what rate they charge you.

Anonymous said...

Also this 15% discount might be the same stunt these builders tried to pull last year. They said that houses will get discounted by 20% and then immediately ramped up prices by 50% (yes 50 and not 30% as the article mentions).

I think the best thing to do is wait. Whenever the correction happens, it will start with baby steps and then crrraaaassshhh as "investors" run to dump their unsold inventory. So wait and be patient.

Anonymous said...

"honchchi, honchchi, honchchi, honchchi, honchchi" says the donkey with the 50 kg of gaur on its back...translation "where's sundass bhai and sussuu behen?"

Anonymous said...

Орон байрны үнийн хөөрөгдлөөс үүдэлтэй хямралаас бидний ухамсарлаагүй сургамж
Роберт Ж.Шиллер

Орон сууцны үнийн талаар маш их буруу ойлголт байдаг. Хаа сайгүй маш олон хүн дэлхийн эдийн засаг маш хурдацтай өсөн тэлж, ингэхийн хэрээр газрын нөөц багасч, байшин, орон сууцны үнэ эрчимтэй нэмэгдэн гэж үздэг шиг байгаа юм.
Чухамхүү энэ ташаа ойлголт нь хөрөнгө оруулалтын зорилгоор хүмүүс байшин авах гол сэдэл болдог бөгөөд цаашлаад үл хөдлөх хөрөнгийн үнийг хөөрөгдөхөд хүргэж, уг “хөөсөнцөр” задран өнөөгийн эдийн засгийн хямралд хүргэх нөхцөл болсон юм. Уг ташаа ойлголтоос болж байшин, хямралын дараа ч орон сууцны үнэ дахин хөөрөгдөж мэднэ. Одоо ч зарим хүн уналтад орсон эдийн засгийн орчинд байшин, орон сууц хямдхан худалдаж аваад хэд дахин өсгөхөөр төлөвлөж суугаа нь нууц биш.
Гэхдээ хэрэг дээрээ бидэнд газар тийм ч дутагдалтай болчихсон зүйл биш ээ. Дэлхийн томоохон орнуудад фермийн болон ойн бүсэд ордог маш их хэмжээний газар хангалттай байдаг бөгөөд хэзээ ч хотын зориулалтаар хувиргах боломжтой. Бөмбөрцөгийн хуурай газрын зөвхөн нэг хувьд л шигүү суурьшилтай хотын газра нутаг байдаг. Хамгийн их хүн ам төвлөрөн аж төрдөг орнуудын хувьд ч гэсэн ийм газар 10 хувиас бага байна.

Фермийн зориулалттай ашигладаг газрыг хотын эдэлбэр газар болгон ашиглахад хуулийн зохицуулалтын хязгаар саад байдаг боловч хэрвээ эдийн засгийн сэдэл, ач холбогдол нь өсвөл алс хэтдээ түүнийг хялбархан шийдвэрлэж болно. Төр засгийн газрууд газрын хязгаарлалтаас болж иргэддээ боломжийн үнээр байр, орон сууц өгөх боломжгүй гэж тайлбарлах нь улам л бэрх болсоор байгаа.
Фермийн газрын үнэ хурдацтай өсөөгүй, өөрөөр хэлбэл, хөрөнгө оруулагчид их хэмжээний өгөөж гарна гэж үзээгүй байна. АНУ-ын хувьд л гэхэд хөдөө аж ахуйн зориулалтын газрын үнэ ХХ зууны туршид жилд 0.9 хувийн бодит өсөлттэй гарсан байна. Иймэрхүү газрын хувьд гол ашиг тус нь газрын үнийн өсөлтөөс бус харин түүний дээр явагдаж буй хөдөө аж ахуйн бизнесийн орлогоос бүрддэг аж.

Америкт шинэ зуунд гарсан тариалангийн газрын үнэ нь 2000-аад оны орон сууцны үнийн өсөлттэй давхцдаг бөгөөд Америкийн хөдөө аж ахуйн яамны мэдээгээр 2008 онд гэхэд нэг га тариалангийн газрын үнэ дундажаар 6800 ам. доллар байсан. Ийм талбайд хангалттай газ

Anonymous said...

Орон байрны үнийн хөөрөгдлөөс үүдэлтэй хямралаас бидний ухамсарлаагүй сургамж
Роберт Ж.Шиллер

Орон сууцны үнийн талаар маш их буруу ойлголт байдаг. Хаа сайгүй маш олон хүн дэлхийн эдийн засаг маш хурдацтай өсөн тэлж, ингэхийн хэрээр газрын нөөц багасч, байшин, орон сууцны үнэ эрчимтэй нэмэгдэн гэж үздэг шиг байгаа юм.
Чухамхүү энэ ташаа ойлголт нь хөрөнгө оруулалтын зорилгоор хүмүүс байшин авах гол сэдэл болдог бөгөөд цаашлаад үл хөдлөх х

Anonymous said...

please write in english

Anonymous said...

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:-)

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SabbalSeshu said...

No one is offering any discount. If at all they do, they try to recover the discount by manipulating the original offer.
The spamming shows that some guys are rapidly loosing their cool. If someone doesn't want to read this blog, they can always go to builders websites and paint rosy pictures in their mind. Why come here and cut/paste foreign scripts.

Everyone knows that the housing is over priced but as long as there are buyers, it is not going to come down. If you think a flat costing 1cr is over priced, then ask some businessman in a mall how much 'Pagdi' he paid to secure a 200 sq.ft shop. You may not believe it, but the price is somewhere around 10-20 crores depending on the mall, and most of it is in black.

You can not drown reality with spamming. The corruption has reached its peak so is black money. Can you believe that a mining baron from karnataka paid a small time politician for his support to the amount of 150 crores.

As for bubble, i just really believe there is one.

SabbalSeshu said...

As for bubble, i just don't really believe there is one.

Anonymous said...

bubble or no bubble...someone is going to get shafted.

If bubble--> then buyers with loans get really shafted.

If no bubble--> cost of housing is too expensive and nonhousing costs also rise in that area. so the common man gets shafted. (vegetable vendor has to jack up prices to afford to sell in that area...cost passed on to customer)

Anonymous said...

If everyone is buying, why dont we all become builders/developers. Anyone interested in teaming up. We could make a killing..

Anonymous said...

SSSSUUUUUSSSssssuuuuuuu....

is here!! Welcome another meaningless 15% increase this festival season!

Anonymous said...

Shakey Shakey!! Increase, decrease, hope, despair....Gotta shake those fence sitters from their fence sitting...

Cling to your positions guys...wait for the right time to reap the harvest..

Desi Batman said...

@ SabbalSeshu 2;01 PM
"As for bubble, i just don't really believe there is one."

What is your definition of bubble? just because black money is poured into real estate makes it natural course of demand?

Anonymous said...

News related to real estate:

Financial experts pessimistic about Indian fund recovery from Swiss banks

http://www.mid-day.com/news/2010/jul/250710-swiss-banks-indian-funds-special-investigation-ram-jethmalani.htm

Estimate money stacked abroad by Indians is around 1.5~3.0 trillion dollars.

Even a small slice of it tricking into India is enough to keep the bubble inflated for decades

I agree with sabal in this aspect

samix said...

I don't understand why all black money should necessarily go in RE.

Agreed that this is a good sink hole for this kind of money but rationality demands why should RE be the ONLY sink hole always.

I feel that once RE hits a plateau, and the black money investors do not see any appreciation in the RE sector they will start to pull out, for they will fear that inflation will start eating into their assets.

Also I really do not make any demarcation between black money and white money.

samix said...

I feel that once RE hits a plateau, and the black money investors do not see any appreciation in the RE sector they will start to pull out, for they will fear that inflation will start eating into their assets.

I say this because once a person earns black money there are two ends that he seeks before laundering that money

1) Wealth preservation
2) Return on Investment

Once the plateau is hit and RE prices do not show much appreciation, then both the above purpose is defeated, and any sensible investor will have to pull out.

I mean do you think that the black money guys make black money just to blow it up, eh ?

Secondly it is necessary that a Plateau be hit, because the black money guys won't just keep pumping in the money irrespective of what the price is.

And most importantly if the price quadruples or twice quadruples within a short span of time, then this mean that we have hit hyperinflation and we are in a different scenario all together, thus the price of RE will not keep increasing for ever and a bust has to come, 20 or 30 or 40 years down the line but it will come.

samix said...

Remember the worlds biggest Black to White money conversion center by the name of Dubai ?

We all know what happened to the RE there

Anonymous said...

It is unlikely anyone(read rich Indians) would bring money from Swiss to invest in Real estate.
Nothing is benami is real estate. One can easily find out who has bought/sell in realty transaction and such people are no fools.

The price hike is nothing but a strategy of handful Mumbai/Delhi builders to keep the price high no matter of how much inventory piled up. Did you ever hear a builder accusing other builders?

Boy, Everything is manupulated in this realty world. I would stay away from Realty whether stocks or buying property as much as possible.

All the hoopla of constructing high rise building in Mumbai by Lodha builders, is to get a favorable response to their IPOs.

Unfortunately interner forums , blogs etc are spoiling realty agents' party in the same way it happened years ago in USA when internet helped consumers understand real selling value of a Car, spoiling Car dealer's profit in a big way.

Anonymous said...

@Anonymous 6:56

Cracks are appearing in swiss banking system. They have started divulging information to USA/Germany etc and it wont be long before the secrecy code will be lifted under pressure from foreign governments.After all, they have to survive in this world. Indians are well aware of this and money has been flowing into india through benaami companies established in countries like Seychelles, Mauritius, Dubai where indians have powerful influence.

Indians are very ingenious and smell a problem years ahead.

Currently politicians from India are acting as protectors of these clandestine accounts but with the changing scenario, no one can predict what is going to happen

shailesh said...

Protection of home buyer’s interest key to real estate resurgence: CREDAI

Stamp duty on booking: Opposed to the common practice to pay the Stamp Duty for registration of the sale document when the project is ready and upon possession, the Act stipulates registration of the sale document at the initial stage that is as and when the first advance. This will result in of investment of Rs. 240/- per sq. ft considering average Stamp Duty and Registration fees on national level being 8%. The extra investment at the rate of 15% would be Rs. 108/- per sq. ft · Extra fund: With insufficient provisions against errant buyers and authorities, the developers feel the need to keep a 10% extra fund flow to make up such uncertainties including cancellations. The extra costs involved for such extra working capital can be estimated at Rs. 50/- per sq. ft. This will also result in extra marketing cost for selling those cancelled flats all put together Rs. 50/- extra costs. Miscellaneous expenses: Additional expenses of Rs 10 per sq. feet on account of multiplication of procedures.

shailesh said...

Buying a home in Mumbai, a distant dream for many

A recent survey conducted by one of India's top real estate research firm Liases Foras, has shown that sale of homes in Mumbai has dipped by almost 45 percent between June 2009 and March 2010.

The survey covered as many as 2,300 private projects in the Mumbai Metropolitan region -- a sizable number -- to give a correct estimate of the real estate scene in the city.

The survey that continues till the end of June has already suggested that the numbers could be worse with sales likely to dip to around 55 percent. The Sion-Mumbai belt (central Mumbai) seems to be the worst affected with sales plummeting by 66 percent while the Bandra- Borivali belt has seen a dip of 60 percent. All in all, according to the survey, there are over 70,000 homes lying unsold in the city today.

Comparative analysis of purchases from last year to now indicates dipping sales -- 12,000 homes sold between January and March this year as against 21,000 homes sold between April and June last year.

This quarter, the prediction according to the survey, is sales in the range of 10,000 homes, much lesser than what it has been so far.

Even though banks have made it easier to avail home loans, people in the city are finding it difficult to realize their aspiration of buying a home. "How do you buy one," asked an exasperated Das, "When the prices are far from realistic. In the western suburbs, between Goregaon and Borivali, prices of homes are in the range of 6 million rupees to 10 million rupees (120,000 to 200,000 U.S. dollars).

One bedroom-hall (1 BHK) homes, which are much in demand in the city are in the range of 7 million rupees (140,000 U.S. dollars) in areas such as Goregaon and Malad.

samix said...

I would appreciate if our "The black money will always keep the markets pumped up" Advocates to reply to the above finding..

Desi Batman said...

What are causes black money?
- avoid paying taxes!

What are effects of black money?
- On paper black and white prices of goods and service are less.
- Many businesses ALWAYS want to show more expenses on books and less earnings on books to avoid taxes, Why? to get tax deductions on expenses and losses. How to do that? get more earnings in black and less in white.


Role of black money in RE?
- Everybody wants to make money. Black money is poured in RE (non-liquid assets) to park unaccounted money. Now many people are safe gaurded against income tax scrutiny and paying tax on interest/earnings on black money. Also it gives opportunity for seller to convert part or whole black money to white when selling (ofcourse pay tax on capital earnings) without paying any penalities for fraud and money laundering.

Also, note super wealthy can hold on to real estate as long as they can even with loss as long as they have benefit of avoiding taxes and penalities.

Desi Batman said...

Just 10 years ago, loans were tough to get. Interest rates were high. Almost everyone owned their houses. Savings were encouraged to buy real estate.

Therefore many of Indians had no pending loans or debts. Savings accumulated were huge.

Now, many indians loaded are cash rich and are gods for investors because of disposable incomes. Buying RE becomes easy with tons of cash combined with easy and cheap loans, high salaries from MNCs.

BUT BUT, new generation or new startup guy is more screwed than ever because of the effects of above. IMPOSSIBLE to buy real estate even with loans. To try this out, just ask any 25 to 30 year old guy to survive on his own without financial aid of his ma, pa, bro or sis. I'm sure he will say my indian culture says to stay together.. BULLSHIT. Basically he cannot afford and MUST be ready to stay in slums or shared dwelling.

rajni sharma said...

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Nd one of your best post...Thanks
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