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.

Wednesday, September 22, 2010

Bad realty loans threaten to nibble at banks’ pre-tax profit

Article Link

Home prices have shot up as developers keen to cash-in on the booming economy have bid land prices to new highs in land-scarce cities like Mumbai. For instance, last month, city-based Neepa Real Estate paid Rs 830 crore for an 18-acre plot in Andheri, Mumbai. Earlier, Indiabulls Real Estate successfully bid over Rs 1,900 crore for two NTC mill plots — the 2.39-acre Poddar Mills and the 8.37-acre Bharat Textile Mills property.

Sanjay Dutt of Jones Lang LaSalle, in his blog, has raised the prospects of a real estate bubble in pockets like Mumbai, pointing out that some properties in central Mumbai peaked at Rs 30,000/sq.ft in 2008 and today stand at 38,000/sq.ft. “There is yet another reason for the concern over a bubble building on the market. All developers who had ventured to buy land overseas or across India are now buying only in their primary cities. In other words, Mumbai developers are concentrating on acquiring land solely in Mumbai, and the same is happening in Gurgaon. Investments are now chasing these Tier-I markets, and if this continues, there is certainly the probability of a bubble in residential property by the end of the year,” he said.