Sunday, January 29, 2012

Mumbai property: Will prices fall in 2012?

Article Link

To be sure, record home prices and higher interest rates have hit demand badly: Mumbai’s residential home sales dropped to a three-year low in the quarter ended December, according to a Bloomberg report.

According to data provided by Liases Foras Real Estate Rating and Research, sales fell 17 percent from the previous quarter to 7.59 million square feet, the report added.

Unsold inventory, or the number of months needed to clear stock at the existing absorption rate, also climbed to 44 months.

The figures elicited a rather predictable response from the founder of Liases Foras, Pankaj Kapoor: “The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” he told Bloomberg.

Unfortunately, we believe there is no guarantee that property prices will fall, no matter what the experts say.

83 comments:

shailesh said...

Realty firms start mega asset sales

Anonymous said...

Unfortunately, we believe there is no guarantee that property prices will fall, no matter what the experts say.

How true!!!

shailesh said...

19-storey IT tower in Adyar razed

This is funny. The company found no takers for IT parks / office space. Hence it appears that IT companies are not interested in adding capacity. They want to now convert it to Residential. Why they think they will succeed now?

Anonymous said...

Water problems in Bangalore. The infra problem is going to get worse throughout the metros soon

http://timesofindia.indiatimes.com/city/bangalore/Bangalore-faced-with-a-waterloo/articleshow/11680730.cms

Anonymous said...

These articles are related to the financial industry in UK
"Nervous bankers braced for job losses" - http://www.ft.com/intl/cms/s/0/0feffc0c-490d-11e1-88f0-00144feabdc0.html#axzz1kuPJGODx

Anyone here who can throw more light on the job market in finance in Mumbai?

Anonymous said...

Jobs or no jobs, RE in Mumbai is not like RE anywhere else. After Switzerland, this is the next favorite parking spot of ill gotten gains of the so-called industrialists, businessmen, politicians.

Nothing short of a revolution will bring prices down in line with what people with honest incomes can afford.

Let the CBI track all financial transactions associated with RE and let the rot be exposed. Till then a 5-10% swing here or there is hardly going to change the affordability by much.

Anonymous said...

Shailesh,
I have noticed massive inventory pile up on buildings meant for IT work in Bangalore e. Not sure if these places are ever going to find tenants. There is a chance that they could convert to residential. we know what that means for realty prices in Bangalore

Pawan said...

They want to now convert it to Residential. Why they think they will succeed now?

Their chances are better. Selling to retail is easier and provides best margins. That is a fact any businessman can tell you. Would even a small time builder negotiate with you? Would even a big time builder have the guts to negotiate with Infosys? That is the difference.

Anonymous said...

UNFORTUNATELY markets dont work that way,anything that goes up comes down,sentiment for RE bears is now at epic levels,all markets r manipulated but in the end free market forces win ALWAYS.
FOR THE PEOPLE WHO WILL ARGUE ABOUT THE BABU BUILDER POLITICIAN NEXUS
KEeP BlabBering.
LIKE THEIR WAS NO LOBBY IN US,INCENTIVE FOR NETAS THERE AND MORE IMPORTANTLY BLACK MONEY INVOLVED. ENJOY THE CARNAGE ABOUT TO HAPPEN.

W. Home said...

No one can exactly tell. Only the number could. If you ever had researched more on your area statistics in housing values and sales, you might get to know a possible answer for that.

new york real estate ce

Alastairvagle said...

Unfortunately, we believe there is no assurance that property or home costs will slip, regardless of what the professionals say.

Community Association

polt said...

Another one of the "this time is different" articles - http://economictimes.indiatimes.com/markets/real-estate/news-/builders-find-ways-to-stay-afloat-hold-on-to-property-rates/articleshow/11680915.cms

Note that in some cases builders are guaranteeing prices to investors, i.e. they are effectively selling call options !

skeptic's ghost said...

This is to the People who are complaining about safety of high rises and quality of building to withstand earthquakes and floods -
Remember the Ahmedabad quake of 2001 and the Chinese Sichuan quake of 08 - most buildings that were of poor quality collapsed in less than 7 seconds.

Since when was India careful about human life? - Open the news papers/sites and see how many die every day in road accidents and crowded local trains, how many are dead due to avoidable actions (not crimes but due to poor planning and poor rules/obedience).

we Indians have been for centuries careless about human lives because of the abundance of humans here, Lives are valued less than people's greed, apathy, attitude and status. No one even yields the road to an ambulance on its way to an accident sport/emergency. How do you expect builders to care about human lives. - They want to just cash their check and wash their hands off any responsibility, so do the government agencies enforcing the standards who have imbibed bribery from the same builders.

This can only change with radical rethinking of our acceptable ways of life. Get an assessment of your building from an independent uncorrupt structural engineer if you care for the safety.

Anonymous said...

Expect honest deal in a fundamentally corrupt culture is wishful thinking. What is India's ranking on corruption/transparency index compared to Japan, US, Europe etc.?

Pawan said...

@skeptic
Safety of high rises

Refer to the Uphaar cinema fire case of Delhi. This happened in the nineties - 15 years back. The building had generators (or were they transformers) in the basement against fire safety rules. Many people died. It was owned by Ansals - a big builder in North India. The Ansals got bail and the case is still on.

Anonymous said...

Guys let's join Anna's movement. What else is out there to address these horrors(corruption, bribery, Black Money, Nepotism, sub standard quality and things like getting bail for murder) that India has?

Anonymous said...

"Note that in some cases builders are guaranteeing prices to investors, i.e. they are effectively selling call options !"

You mean they are selling put options.

Anonymous said...

For Indians, RE is like gold. It is about capital appreciation.
1. Hold on even if prices are falling one day it will appreciate as always has !
2. Gold and RE is forever - give it to your children and grand children.
3. Show off to society.

Except put it on rent, Gold can't be. Stay in RE, you can't 'stay in' Gold. RE has maintenance, Gold doesn't.

Finally, if Gold was available to rent for marriages and other show off at fraction of price - would that bring down price of Gold? If not, why should low rent bring down price of RE?

polt said...

@Anon - "You mean they are selling put options."

Correct. Put options (not calls as I wrote earlier). Thanks.

Developers are willing to raise funds at 18% as mentioned in the article and sell put options (which may look free on paper, but always carry an implied cost). Why don't they simply reduce prices by 18% instead and try to clear inventory?

Anonymous said...

@polt: that would be quite psychologically damning to their entire business model! how can RE ever go down ? that too by 18%. what about the poor investors who had bet everything on RE, thinking that it can only go up.

Pawan said...

Finally, if Gold was available to rent for marriages and other show off at fraction of price - would that bring down price of Gold? If not, why should low rent bring down price of RE?

If I gave you money at 10% to speculate in Gold and you could rent Gold for only 5% a year and prices stopped appreciating, that would force you to sell and bring prices down.

KSM said...

http://www.moneycontrol.com/news/cnbc-tv18-comments/realtyshaky-ground-cash-crunch-=-incomplete-projects_659368.html

Another evidence...sit tight and wait

Pawan said...

Amongst the 27 emerging economies, we are better than only Greece!

http://www.economist.com/blogs/freeexchange/2012/01/emerging-economies

Anonymous said...

Amongst the 27 emerging economies, we are better than only Greece!

What matters is we are approaching from bottom while they are crashing and reaching bottom soon.

Ankan said...

Very nice post ! Very helpful. Thanks for sharing..

Pawan said...

What matters is we are approaching from bottom while they are crashing and reaching bottom soon.

Did you read the article before posting your stupid comment? The article says that our economy is in worst shape after Greece because of our high fiscal deficit and govt. has least room (after Greece) to give any stimulus or prevent hard landing.

What this means is that the govt. can no longer just cut interest rates and get the party going.

In an earlier post, I had already established the inverse correlation between interest rates and asset prices.

polt said...

"Why don't they simply reduce prices by 18% instead and try to clear inventory?"

This is in all likelihood a coincidence, but apparently luxury home prices fell by 18% :)) . In any other country this would have been considered a crash.

http://economictimes.indiatimes.com/markets/real-estate/news-/prices-of-luxury-homes-in-mumbai-fell-by-18-last-year/articleshow/11697118.cms

Can we now give up on the prices wont fall here in nominal terms, black money, govt manipulation, we are different,etc arguments ? Our bubble seems to be deflating.

Anonymous said...

This is in all likelihood a coincidence, but apparently luxury home prices fell by 18%

with this 'fell by 18%' - who lost money and who is crying - builders? buyers? banks? No one. Party is still going on.

polt said...

"with this 'fell by 18%' - who lost money and who is crying - builders? buyers? banks? No one. Party is still going on."

How do you know builders are not hurting, bank managers are not worrying about defaults, investors are not nursing losses ?

Anonymous said...

Well, rupee is back under 50. Looks like party is going on again.
Sensex is up around 1500 points in Jan.

But for how long?? Any guesses?
I still feel the RE bubble is too big now and the more air gets now, the louder it will pop.

Anonymous said...

RE prices aren't going anywhere unless the "mango man" decides it's time to stop voting and start slapping...

Anonymous said...

mango man is busy counting RE wealth. Too easy money for a lot and a very ignorant young generation who has not seen the pain of 8s and 90s.

Pawan said...

mango man is busy counting RE wealth

I don't think so. You are rich if you drive an Audi, vacation in Europe and frequent 5-star coffee shops. If you own a one crore house in some slimy neighbourhood, you are still a nobody.

Pawan said...

http://www.firstpost.com/economy/corruption-cant-drive-house-prices-higher-forever-198833.html

Anonymous said...

In USA RE prices in NYC, DC and SF didn't fall, infact, in DC prices went up! Earnings also in these places have gone up! If you happen to visit these places, hardly you see sign of recession or slow down.

What is so different for metro cities in India like Mumbai, Delhi, Bangalore?

Anonymous said...

Just read in TOI that lauda group is planning to construct new apartment buildings in central Mumbai and these are expected cost Rs. 50Cr each!!!!!!!!

Most people in India are struggling to eek out a living and this lauda group is trying to insult the dignity of every Indian . What a vulgar display of wealth!!

Rumors are that Wadhera and Rajiv Gandhi are beyond the scene promoters

So much for Anna's efforts

I'm sure Kalmadi, Pawar , Kundimpzi, Raja etc etc must have made pre bookings

Long live Bharat Mata ! Vande mutram

Anonymous said...

Rajiv Gandhi ????

polt said...

@Anon - "In USA RE prices in NYC, DC and SF didn't fall"

They might have risen in the last year or two, but see below charts for a 10 year history. Prices are well below the 2006 peak.

Price chart for SFO - http://www.jparsons.net/housingbubble/san_francisco.html

http://www.jparsons.net/housingbubble/new_york.html

http://www.jparsons.net/housingbubble/washington.html

Corrections everywhere. Also see the metro area case shiller data.

http://blogs.wsj.com/economics/2012/1/31/a-look-at-case-shiller-by-metro-area-8/tab/interactive/?source=patrick.net#s

Anonymous said...

For Bhagwan's sake,
Please stop this NY, San Fransisco, Los Angelis propaganda. How does this affect us.

If you are showing off, please do it elsewhere. We all know that you are jet setters, investing in these cities, but why make us sad and jealous.

If you are not happy to live in India, go to one of these cities where you own property. Please do not shit here and make us to smell the stench

Simple Indian

Anonymous said...

Prices in DC, SF and NY didn't fall that much as yet. They have fallen only 20-25% so far as compared to 60% drops in majority of the country.

BUT, prices are falling very sharply in these cities as well now. Their bubble is bursting now as Govt. is reducing spending, all the 100 dollars per hour contracts are getting over in the next 6 months. Moreover, NY is seeing a lot of layoffs and Wall Street party is also getting over.

I think USA will keep printing till it defaults and that would take another 2-3 years. After that USA is Greece. Everything will be worth pennies on dollar. They cannot stop printing as special interests want quick and a lot of money. Middle class is in the toilet for a long time.

Anonymous said...

You are rich if you drive an Audi, vacation in Europe and frequent 5-star coffee shops. If you own a one crore house in some slimy neighbourhood, you are still a nobody.

Amen to that bro. In other words, if you're rich you do not need to venture to blogs like these to determine the future course of action. Why? Because you are "making" the future either directly or indirectly through your puppets in government, industry connections etc.

In USA this is euphemistically called as "lobbying". In India our so called "leaders" and "champions" of industry go at great lengths to hide this nexus even though everyone knows it exists!

Anonymous said...

For Bhagwan's sake,
Please stop this NY, San Fransisco, Los Angelis propaganda. How does this affect us.


Just gives you a different perspective as long as you realize that you are comparing apples to oranges.

With Facebook on the verge of IPO home owners in the Silicon valley can barely contain their excitement about their stock and RE portfolios.

Even I am fed up of non-stop discussions around the water cooler in my office about impact to RE values that all this easy money being unleashed will cause.

AnonymousLulz said...

US has a vast oversupply and no booming population to buy up houses.
That's the main reason prices continue to fall in lesser desirable neighborhoods.
Also existing houses are huge, some have 3 car garages even though only 2 people stay in house.
(same for Japan where population is actually declining).

Meantime while this blog has been running India has produced about 150 million babies equivalent to population of Japan.

Anonymous said...

General population do not understand the market dynamics and do not follow equity market very closely. No one cares about real estate sector index is up or down. They believe in what they see.

One of close relative had booked flat at 20 lakhs. Got possession after 5 yrs. In the same building, builder is asking for 12k per sq ft. That makes flat worth 80 lakhs. My relative is in heaven and so are her neighbors. Everyone is so happy and proud on their investment that only mantra they know is property prices will never come down. Btw builder was asking for 65 lakhs last year. So imagine with this rate it worth 100 lakhs next year and probably 200 lakhs in 3 years.

In nutshell every one is crore pati in India and I am relative of crore pati :)

Anonymous said...

My relative took possession Last week. So guys do the maths and enjoy party.

Anonymous said...

I live in jawahar nagar, goregaon. Just opposite , lives a guy who owns the entire building. There are about half a dozen young boys, plus 2 watchmen employed by him. People are telling me that this person is a billionaire, and owns several jewellery shops in western suburbs plus a factory. Apart from the young boy workers, there are 4 school going children, probably grand children. Every morning, they come out of the compound, shit in the gutter, wash their butts on road side. All of them wear smart uniform and are transported to, I guess to some expensive convent school.

My point is, even if you live side by side the rich people, you have to bear with their cultural unhygenic habits.

someone mentioned 50 cr flats. Those living there certainly send their children to the building lawn to shit, afterwhich they may wash their butts in the swimming pool

It doesn't make a difference if you live in a modest 20 lakh flat or 50 cr apartment.

So why cry about rising flat prices

Anonymous said...

@Anon - "One of close relative had booked flat at 20 lakhs. Got possession after 5 yrs. In the same building, builder is asking for 12k per sq ft. That makes flat worth 80 lakhs."

1. Where is this? What is the rent that people can expect here?
2. How many apartments has the builder sold recently ?

Anonymous said...

Historic supreme court judgment on
2G licenses out!! Supreme court quashes all 122 licenses.

This has a huge impact on telecom, realty companies who had invested in telecom, and new FDI in the country (loss of confidence in India).

Expect an avalanche of real estate sales to hit the market between now and March 31, as Real estate balance sheets are in the red, bank payments are due (most are NPAs) and balance sheets will be further hit with the telecom license charges.

Rumor has it, that a bunch of PILs on real estate are next going to be brought.

The shit has hit the fan, the crash starts now!

Anonymous said...

DB Realty and Unitech Fucked. SBI, PNB have large exposure to many of the telcom companies whose licences have been cancelled. SBI clarifies it has only direct exposure (read : immediate impact) of Rs.1100crores but it could be bigger. SBI has backstopped DLF, HDFC has backstopped Lodha Group amongst others such as Bank of India and PNB. All of these hold a lot of realty loans and all of these are set for either interest holiday, forced resets or eventual default if they dont start selling.

So brave face all along for builders, but if this government falls, Real Estate will crash. Period.

Anonymous said...

Read this: http://www.moneycontrol.com/news/market-outlook/verdict-negative-for-db-realty-unitech-tulsian_661335.html


DB Realty and Unitech Fucked. SBI, PNB have large exposure to many of the telcom companies whose licences have been cancelled. SBI clarifies it has only direct exposure (read : immediate impact) of Rs.1100crores but it could be bigger. SBI has backstopped DLF, HDFC has backstopped Lodha Group amongst others such as Bank of India and PNB. All of these hold a lot of realty loans and all of these are set for either interest holiday, forced resets or eventual default if they dont start selling.

So brave face all along for builders, but if this government falls, Real Estate will crash. Period.

samix said...

Ben "Helicopter" Bernanke, has decided that that US interest rates will be 0% for the next three years.

Sunworld studio apartments said...

Very nice post.!!

Anonymous said...

Poor Indians:

Audi India sales up 39% in January

http://www.samachar.com/Audi-India-sales-up-39-in-January-mccsMobifec.html

Shall we now talk about RE...

Pawan said...

Audi Sales up...
Shall we now talk about RE...


As someone mentioned,
1) If GDP grows at 5%, rich still make money
2) If GDP grows at 8%, middle class also makes some money
3) If GDP grows at 10%, poor also get some share.

Statistics are a big lie. Fact is Audi sold 667 units in January. Lets say BMW, Audi and Merc sell 1500 cars a month or approx. 20,000 a year. And the owners keep the car for 5 years. We will have 1 Lakh owners of high end cars. Big deal?

Mumbai alone registers sale of approx 5000 properties per month. An average property changes hands 2-3 times before registration. So I would say the Mumbai monthly number is 10,000+. All India number may be 100,000+. So if all these ultra rich people buy a property every month, RE still would still have fallen.

Anonymous said...

Story of 80 lakhs flat is from Mumbai suburbs. I had same question to my relative, how many flats builder has sold since last two years, I believe answer is zero, but still rates are going up.

East or West India is best.

Anonymous said...

@Anonymous who has written about shitting and butt washing


Please note that all buildings in mumbai have toilets. The only reason why people shit outside is that shitting inside house is taboo in some gujarati sects, jains and marwaris. Mon and women do it under the cover of darkness, but children normally sent out eo do their big jobs in the morning. There is nothing re pungent or shameful in this practice. This is Indian cultural norm.

Every culture has its practices. Don't make fun of it. We are all Indians. Money has nothing to do with such rituals

Long live Hindustan

Anonymous said...

@anon - "Story of 80 lakhs flat is from Mumbai suburbs. I had same question to my relative, how many flats builder has sold since last two years, I believe answer is zero, but still rates are going up."

If there are no sales, then the price mentioned is of little significance. The price is ultimately set by the buyer.

BTW, the bubble seems to higher in the suburbs of Mumbai. A few months back, someone had posted about how poorly built apartments on the outskirts of Thane (or Dombivili?) cost around 70L+, but the rent would be around 10k.

greengoblin said...

I bet you would be asking the same question in 2013.lol."Paisa aa gaya hain sabke paas" my building's watchman tells me.

Anonymous said...

Expect the RE bubble in AU to deflate faster this year.

"Unemployment has now reached a record high of 1,278,000 (10.3%). This is the highest ever recorded Roy Morgan unemployment estimate in Australia. " - http://www.macrobusiness.com.au/2012/02/more-on-the-roy-morgan-numbers/

RealityFool said...

@5:44 PM Anon

he only reason why people shit outside is that shitting inside house is taboo in some sects ... .


That is NOT preserving culture, That is not keeping up with the technology.

I can understand you do that when you are poor.
But inspite of having the facility, following the stone age methodology is just stupid.

And why should I stay with these people after paying such a hefty price for house?

Anonymous said...

No matter where one lives in Mumbai, he is surrounded by filth. There is a building in Malad west, near mind space , surrounded by hutments that do not have toilets. The people irrespective of the time of the day, defecate by the on the road leading to the posh building. The residents have formed a watch group to drive away such people but is of little help. The police keep away from this place, as few havaldars live in these zopdas

Now can we blame the hutment dwellers for defecating ? No. Even affluent people do it as penned by a blogger above.

There is no solution, my friend. Get used to it. You just go to sachivalaya mla hostel grounds in the morning, you will find some of our esteemed politicians shitting behind lawn bushes, well guarded by black cat commandos

I love my INDIA

Anonymous said...

"That is NOT preserving culture, That is not keeping up with the technology."

Technology snobbery or blind worship of technology is not good either.

Look at it another way, people who have access to technology (i.e. US) have the worst impact on environments.

If we are going to lecture anyone then better start from the top down...

Anonymous said...

The residents have formed a watch group to drive away such people but is of little help.

It would be much better if the affluent residents contributed a couple of thousand rupees each to educate and build these poor people proper sanitation facilities.

This mentality of I've had mine, now it's time to drive everyone less fortunate than me away is laughable.

What type of a society does this attitude lead us? Imagine if the Bill Gates and Warren Buffets of the world took this same position.

The 99% of humans would be relegated to living like animals...

RealityFool said...

@1:39 PM

I am surprised a person who uses internet is supporting use of public street as toilet.

he calls it tradition.
And he says technology is evil.

"It is utter failure of our education system."


Oh my God! After paying cores , I have to put up with these kind of people?

I better not buy a house and rent a place where these kind of "Educated" people do not live

Anonymous said...

Massive property price appreciation by 2014

http://www.dnaindia.com/bangalore/interview_massive-property-price-appreciation-by-2014_1644547

Anonymous said...

I am surprised a person who uses internet is supporting use of public street as toilet.

About time to strike off the virtual from your reality...

In the real world, 90% of the people don't need this Internet, facebook, google or twitter.

And yes, you too will (probably have) pee/poop in the open if you do not have a toilet to make use of. That's why it's called basic neccessity.

Ankan said...

Really wonderfull information can be found on this blog..

Anonymous said...

This is the funniest blog conversation I have seen.

Somebody is actually defending defecation in the open in the middle of a huge city in the name of tradition and religion? WHAAAA? I mean seriously?

Even the practice of Sati was a tradition. Does this mean that we should start it again?

Only today, minister Jairam Ramesh was saying that women would rather buy cellphones that use toilets. The government is building toilets but people aren't using this.

Mera Bharat Mahaan indeed!

Ankan said...

great post.thank you very much.good work!

jain housing said...

jainhousing offers cost effective flats for all the class peoples

jain housing said...

jainhousing offers cost effective flats for all the class peoples

MY ESTATE POINT MUMBAI said...

MUMBAI IS ONE OF THE FASTEST GROWING CITY IN INDIA. To make sure visit our portal...

http://www.myestatepoint.com/real-estate-properties-in-Mumbai

Realty Minister said...

Nice Blog! I found interesting informative blog. Thanks for good information. Retail Shops in India.

property sites said...

Greatly loved the post. Looking forward to seek more of your fantastic post.

go through said...

This is really funny and impossible or kind off fake that prices of Property will go down.

course in real estate said...

Hey, that was really very helpful. Please share more such updates.

Deepak Narain said...

Prices in Real Estate fell only once the best of lot is taken by others. For example: right now the South Mumbai real estate is abuzz with pre-launch offer of Lodha Bluemoon. And the prices are only going to go up when the launch would happen later. So the ones who book property now will rejoice if they get an allotment.

Sichermove KL said...

I dont think Price will fall in 2012... real estate agents in India

sichermove mh said...

nice post.. share more updates...
apartments in Nagpur

pushpendra yadav said...

It's really great post, I appreciate you and I would like to read your next post. Thanks for creating this informative post.
Arihant

shambhu Kumar said...

I really appreciate your point that real estate market price will not be constant due to indian large population.
Buy Property in Mumbai

Sky Miltonia said...

Awesome way of thinking,good things, Presently there are many people looking about the same topic.,now they will find the required options by your content.We are now looking forward for extra info about it

Siyaram Kanojiya said...

We can provide you with some of the best options for buying a property in Badlapur. You could invest your hard earned money in one of the most reasonably priced property listing from us. So, don’t think twice and contact us!