Thursday, September 23, 2010

Forget Mumbai, the real bubble is in Ahmedabad

It looks like Gujju investors are returning to their homeland and sparking a buying frenzy in Ahmedabad. Ahmedabad is now resembling Mumbai when you compare prices. Ahmedabad has no known industry which draws thousands of job seekers like Mumbai, Pune or Bangalore.
Ahmedabad can be a good city to live in if one has good job prospects or if one is running a good business. Same goes to Nagpur, Coimbatore and Mysore. However as of now I know noone in my current set of friends who would like to relocate to these cities. Maybe times will be different in a few years

DNA reports

About a year and a half ago, recession in the city realty market had builders and buyers alike, worried. However, about a year since the first signs of recovery in June 2009, realty in Ahmedabad is back and booming. In fact, property prices in the city have inched up by nearly 35%.

The high economic growth and rate of urbanisation, along with the improvement in infrastructure in the state, have been catalysts in the growth of the real estate market. And the boom is not restricted to the western side of the city alone - properties across the city, irrespective of location, have witnessed a steep rise in prices.

However, Ahmedabad had been anything but spared by the global meltdown. The property market in the city had been considerably hit by the recent economic slowdown. But property prices started moving northwards in June 2009.

"If you compare the pre-slowdown prices with the present ones, there has been an increase of about 22-25%. However, if you consider the cumulative rise in prices since the worst phase of the downturn, the increase has been almost 35%," said Suresh Patel, GIHED president.
He said that the property prices in the city went down by around 12-15% due to the recession, and it took around four-five months for the prices to get back to the pre-slowdown level. "After that, they have increased by around 22-25%," said Patel.

Online real estate service provider company's property index shows that realty prices in Ahmedabad have grown by 36.8%, compared to the national average of around 18.6%, between June 2009 and June 2010.

Jaxay Shah, president of the Confederation of Real Estate Developers Association of India (CREDAI) - Gujarat, also acknowledged the same and said that the higher GDP rate in the state and the infrastructure available have lent a boost to the market. There still remains a lot of scope for the real estate industry in Ahmedabad, he said.

Realtors believe that better living conditions could be making Ahmedabad a viable alternative to Mumbai.


Anonymous said...

Realtors believe that better living conditions could be making Ahmedabad a viable alternative to Mumbai.


Gujaratis are prosperous people but their living standards are the worst in India. I live in a gujarati co-op society and i've seen these guys sending their children to defecate and urinate on the road side. Most families employ child labor and are very tyrannical towards their servants. This community is the worst in India but try to dominate the commerce because of their financial clout which in term is due to their corrupt practices
now, if Ahmedabad is considered to provide better amenities than mumbai, then it must be a real toilet without flush

Anonymous said...

RE in Mumbai has gone out of reach of the common man. Forget independent house, even owning a flat has become a distant dream for many. Slowly, other Indian cities will also join this trend. It will be interesting to see which other Indian cities will be added in this category and also whether the bubble will hold out until few cities are added to this category.

Anonymous said...

This story looks like the author was paid to write it. Someone is investing a lot in Ahmedabad real estate and he thought that a little bit more "investment" in a reporter is not a bad idea.

Dudes, when you see stories like these, please learn to read between the lines...

Anonymous said...

There goes the bubble!!!!!!!

If we consider 1% of the population is rich, that gives us a figure of 15 million. These guys will garble up all the new live-able construction, either for living or investment while you and I, dream of a imaginary bubble burst. Of course sub standard and slum dwelling will be available for the rest.

Thanks to our Harvard Educated PM and his cronies, life in India in India will be miserable to most of us

Anonymous said...

Thanks to our Harvard Educated PM and his cronies, life in India in India will be miserable to most of us

Who do you want to replace him by? The best man the BJP can project is Narendra Modi and although he has done a lot for Gujarat's economy, I think he has also made the rich richer. This is how capitalism works, it squeezes the middle class and creates more rich and poor people. Do you want us to walk away from free market capitalism? No use blaming MMS, I think we are stupid to elect these politicians without thinking about the policies they push, and we have to pay the price.

Anonymous said...

@Anonymous 4 40,

Well said. Whichever party that may grab the power, will continue the free market policy as this will make the rulers and their relatives immensely rich. Those who are not in their clique will be brainwashed to believe in the imaginary prosperity.

Life will go on, as always How come the 10% growth rate does not change our gdp, gnp figures. Isn't it evident that the government is building infrastructure at the expense of starving millions. Who wants a cell phone when one can not afford a meal

Anonymous said...

Being a millionaire in US, we should be able to afford an independent bungalow in Mumbai.

shailesh said...

High property prices, mortgage rates turn away buyers

MUMBAI: High prices and rising mortgage rates are hurting demand in India's once-booming housing market, jeopardising a pipeline of about $6 bn in initial public offerings (IPOs) from Indian property companies.

The real estate firms are seeking funds to finance land acquisitions and lock in runaway land prices but their IPOs are faced with the prospect of poor investor response.

The line-up includes a long-delayed IPO from Emaar MGF, the Indian JV of Dubai's Emaar Properties, a $600 mn IPO from Lodha Developers, a $600 mn offer from Sahara Prime City and a $515 mn issue from Embassy Property.

An unhappy confluence of negatives means the prospects aren't likely to brighten soon for Indian developers and their IPOs.

Land costs are one issue. Land now accounts for two-thirds of total cost in some projects, compared with an average of 40 to 50 percent previously.

Rockon said...

The real estate firms are seeking funds to finance land acquisitions and lock in runaway land prices but their IPOs are faced with the prospect of poor investor response.

Anonymous said...

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Anonymous said...

Do you want us to walk away from free market capitalism?

* An enforced legal tender
* thousand's of trade regulations
* Trade agreements
* Licenses required in almost every sector
* Economy micro managed by a group of babus and netas
* A central bank and member banks that create deposits at will out of thin air
* A currency backed by nothing.
* Interest rates managed by a monopoly bank

Do you call this free market capitalism? this is hard core fascism that takes from the poor and gives to the rich!

Anonymous said...

Today I visited, Rustomjee Elanza.. at Malad, Mumbai. It is quoting at 13000 Rs per square feet, and rate 15 days back was around 11000 .. builders are in full mood of cashing in, as I talked with the liftman there, every weekend, at least 150-200 investors visit the site. As per them,
few actors , CEOs , directors etc have booked apartment there. a 2BHK costs around 2 Crore, 21/2 BHK costs 2.5 crore ... Now guys tell me, when buyers are around, which builder would reduce price in Mumbai ? so it would be foolish to dream about real estate bubble would burst anytime soon in Mumbai

Anonymous said...


And so what are you suggesting?

Anonymous said...

@Anon above, you are absolutely right, timing the fall of a particular market or popping of a bubble is indeed a very risky task, infact there are countries where RE bubbles have completed their life cycles in 20 , 30 years from smart money move in to the actual blowoff.

According to me the precarious condition of the global monetary system is the only immediate threat to the RE market in India.

Anonymous said...

This is what marc faber had to say about RE in India

We met the ever-contrarian investment guru over lunch on the very afternoon that equity investors erupted with joy after the Bombay Stock Exchange’s sensitive index (Sensex) crossed the 10,000 mark. But when we asked him to name his favourite asset class in India, pat came the reply: “Real estate.” Faber dismisses current fears of a bubble building up in Indian property. “You have the least developed real estate market in India. Commercial property under construction in the whole of India is less than what is being built in Beijing alone. There is a lot of building still to come.”

disclaimer: I don't know how well he knows the Indian market.

Anonymous said...

saw a 2 bed room in vile-parle(east) in an SRA development for over 1.5L. carpet was 700 sq ft which looked closer to 600 sq ft. super builtup quoted was 1200 sq ft. this looks like a loading of 100% :)

Anonymous said...

Yestreday been to a property launch function in Chennai(Ambrosia by Asquare on OMR). It was my first experience at such a event. They had some makeshift arrangement for the sample flat which was okay. But People were booking apts like it was some train ticket and there was PA system that was congratulating ppl on their booking and updating the availability status.
All I could see was madness around and ppl booking flats so that they do not miss this LAST opportunity .
So when is the bubble bursting :-(

Vik said...

Charlie Munger's fantastic interview at the University of Michigan

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rajni said...
This comment has been removed by the author.
sapna said...
This comment has been removed by the author.
Anonymous said...

It is true that nowadays, Ahmedabad is one the best Metrocity for the investment...

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DholeraPrime said...

definitely, the real bubble is in Ahmedabad because if you don't know about dholera sir than its upcoming future growing more about Dholera SIR and how it will develop in future.

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