Tuesday, December 13, 2011

Mumbai developers run for cover, cut property prices

Article Link

The developer has blinked. Prospective buyers who were waiting for correction in realty prices should rejoice, as city developers have started bringing down property prices by 10% to 30%.

Manohar Shroff, general secretary of the Maharashtra Chambers of Housing Industry, Navi Mumbai, admitted that developers had started reducing property rates to survive in the sluggish market. Higher interest rates, rising inflation and increasing construction costs have not only dampened demand but also investor desire to book and own more flats.

Pankaj Kapoor, managing director of Liases and Foras, the real research firm said, the cash flow in the realty market has dried up in the last two years, and this has spread panic among developers.

"Earlier, the investors were helping developers by pumping enormous amounts of cash in the property market. Now, the investors themselves are in deep financial trouble, as they could not sell the properties they had bought earlier. So, the market is quite tight," he said.


Anonymous said...

From previous post: Skeptic Said:
So does that mean for present government to fall - RE prices should fall but for RE prices to fall, present Govt should fail?

If that is the case then only an external black swan event will start this course. Perhaps the Fed+ECB mishandling of Euro will cause a systemic banking collapse by the unexpected run on derivatives market, or Iran will bomb Israel, or China does something stupid.

There are other factors:
--Overinflated salaries in India which will correct soon.
--Layoffs coming soon as service economy needs countries to serve. All US and EU is going in the toilet.
--India's debt to GDP ratio is very high.
--Anna Hazare may through in a wrench for corruption.
--IT jobs may leave India soon for cheaper countries.
--NRI's are dry with money and around 3 lakh people are coming back in the next few years.
--This concept that NRIs have invested is true but most money coming from outside is actually money from India being laundered as foreign money. RBI has been printing at full speed for the past few years.
--A lot more factors like Stock market Sensex going back to 12K. It will take away all the high salaried stupid MBA jobs who are ripping off the country. I met someone in Delhi who is a fresh MBA and starting salary of 78lacs in Mumbai plus bonuses in crores. It cannot continue like this for everyone. Only a very selected few with really good mind would succeed for these salaries.

Basically, Indians are currently in denial mode. Then there would be anger mode which will last all of 2012-13. Then there would be acceptance that India is not really shining but it was based on money printing and low interest rates and easy money/debt.

Anonymous said...

India Story: Coming to a halt
December 13, 2011 04:21 PM

No reforms and misgovernance is showing

It seems almost like yesterday when screaming headlines in economic dailies referred to India as the emerging superpower. Today, that story is dead as can be. Instead, we continue to be a story of lost opportunities and global media is beginning to turn the spotlight on our impending financial crisis which is likely to be precipitated by high inflation, poor governance, large giveaways and weak rupee as portfolio funds threaten to exit. Initially unwilling to dismiss the India story, global media is turning strident, in line with global banks. UBS recently said about India, “Growth is disappearing, the rupee is in disarray, and inflation is stuck at near-record levels.

skeptic's ghost said...

Here is an interesting assessment of India's credit growth wrt chinese credit growth that includes shadow banking.

Pivot Capital - China bubble report

Can anyone extrapolate and tell how much the shadow banking is involved with the India growth story also?

Anonymous said...

India doesn't have that much Shadow banking system. The World market is currently dominated by investment banks based in US and EU like GS, JPM, Credit Suisse, etc. These institutions are major players of shadow banking.

But the banking system in India has been downgraded to negative including SBI. Figure out how they are giving loans when they don't have that much in deposit. Are they raising money by the bond market or RBI is just printing and handing them their needs.

KSM said...


Now slowHi,

Now slowly newspapers started carrying out articles about RE crash.
Now the news has to spread to masses.

I have done my bit.

www.ksmfinanceindia.blogspot.comly newspapers started carrying out articles about RE crash.
Now the news has to spread to masses.

I have done my bit.


Anonymous said...

the time to celebrate is coming,for all those people who have exited property market,just be a little more patient,the builders wont give up easily,remember when 4-5 months back zee business started reporting on property bubble,suddenly out of nowhere investors clinic sponsored them,now they show in their property adds"RE MAAIN RETURN TO JAROOR MILEG"
now wait and see what they will say
nevertheless RE ponzi is almost over in india
once the "grasses" i mean the masses get to know it will be too late..cheers

Anonymous said...

One data point a lot of people don't look at because of black money confusion is growth in bank deposits. In the last 6 Years the ( aggregate) growth is between 20-25% ( in dollar terms the growth is 0%).

One more way to say asset Price rise is way out of whack with every freaking statistic we can look at.

Anonymous said...

This article is misleading. The builder-rats are specifically stating that these discounts will not be made on ready properties, but just off-plan (i.e. fictional)properties. Given the probability of builder insolvency and/or failure, in this market, I wouldn't touch off-plan property with a 20 foot barge pole unless I was given a 80-90% discount. 10-30% certainly doesn't cut it.

Anonymous said...


Looks like there is some direction emerging in the market... and the new is not good for the builders!

I wait for the rental returns of properties to start making sense before I start picking up some good ones... there is sensible money waiting in the sidelines but it wants to see some returns that beat risk free returns of 10%+ in deposits and FMPs.

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