Friday, February 03, 2012

Mumbai Home Sales Drop to 3-Year Low as Prices Climb to Record

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Mumbai’s residential home sales dropped to a three-year low in the quarter ended December as record home prices and higher interest rates crimped demand, according to Liases Foras Real Estate Rating & Research Pvt.

Sales in Mumbai, India’s most expensive property market, fell 17 percent from the previous quarter to 7.59 million square feet, said Pankaj Kapoor, founder of Liases Foras. The city’s unsold inventory, or the number of months needed to clear stock at the existing absorption rate, climbed to 44 months. A “healthy market” normally maintains about eight months of inventory, according to Kapoor.

“The likely scenario looks like we will see a dip in prices seeing the dismal sales and as liquidity remains tight,” Kapoor said in a phone interview from Mumbai yesterday.

17 comments:

shailesh said...

This is news. CM has admitted prices are down 18%. How can he be so sure? I haven't seen any reports. Does he know something that general public does not?
==

The new development control rules have brought real estate prices down by 18%.

Article Link

shailesh said...

Lame policies plague affordable housing


Faulty land policies are preventing development of affordable houses in urban areas, which are likely to witness huge demand for residential premises in the times to come, HDFC Chairman Deepak Parekh said.

"In India land policies have created distortions that have led to inordinate high prices in many key metro cities, Parekh said while addressing a National Housing Bank (NHB) Conference. "In places like Mumbai and Delhi and some large metros, land constitutes 90 per cent of the cost of the house.

If 90 per cent is the value of land, obviously it signifies we have wrong faulty land policies and with those land policies you cannot have a solution for affordable housing," he said. According to reports, the demand for affordable houses has not been met due to various reasons, including inadequate supply of houses as well as absence of credible builders in this field. Parekh said there was no standard definition for affordable housing, but land prices need to be lowered to build low-cost houses. "This is the most challenging aspect. While there can never be a standard definition of what is affordable housing, the bottom line is land prices need to be reasonable for affordable housing to come into supply," he said.

As per estimates, only 30 per cent of Indian population lives in urban area and this is going to go up to 40 per cent in the next decade.

"With urbanisation increasing so rapidly, it is essential to bring more land under urban usage. High land prices result in housing being out of the reach of middle class families

Anonymous said...

Prices climb to Record

Mumbai builders seem to be having the pricing power for now. Some mighty strong hands are backing them up...

Anonymous said...

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

Massive property price appreciation by 2014

Anonymous said...

look at the condition of the roads. potholes to put moon craters to shame. no roads. no water.
http://www.dnaindia.com/bangalore/report_bangalore-heading-for-a-water-crisis_1645786

yet!!!!

polt said...

Off topic, but somewhat related to bubbles. I found this interesting comment by a 50year old American techie on another website. (Slashdot.org)

" People got used to massive salaries during the boom years and adjusted their lifestyles to match that income. Now that the boom's over and sanity is restored, many "can't afford to survive" on what the market will bear."---
--- "Your pay will not scale forever, and if you scale your cost of living with your pay, rather than scaling your savings, it will hurt when that trend reverses itself."

Our salary and asset price bubble will end (like ALL others throughout history). As the above poster mentioned, I see a lot of folks scaling cost of living rather than savings here in India.

The last decades double digit salary increases here were a historical abberation. Mean reversion will occur in salaries too (slowly happening in the finance industry. Others will follow). And anyone who thinks otherwise needs to have his head examined.

polt said...

Off topic, but about bubbles.
Posting quote from an older (50+) American techie. "People got used to massive salaries during the boom years and adjusted their lifestyles to match that income. Now that the boom's over and sanity is restored, many "can't afford to survive" on what the market will bear." ---

--- "Your pay will not scale forever, and if you scale your cost of living with your pay, rather than scaling your savings, it will HURT when that trend reverses itself."

Our bubble (both salary and asset price) will also end. However, I do not see too many folks scaling up savings when salaries increase. They tend to scale up expenses.

VJ said...

@Polt, I agree with most of your logic and other guys about bubble eventually busting....but I really don't see it happening especially in India...look at it from another angle...let's say the bubble indeed bursts sometime this year...what would be the real picture? Most people loose their job in all possible layers of society...then what? do you see all those who have migrated into metros moving back to their villages? do you think people who would have lost money paid as EMIs so far would just accept the reality and move on? What abt Banks who have big stakes in RE? if they go belly down what abt honest savers who have banked their money in those banks? Likewise there are so many things which I don't see reverting back to sanity the way it was before the so called boom....I see only terror on roads if the bubble bursts and just for that one reason the bubble might never burst....My 2 cents!

Anonymous said...

CNBC Awaaz has run a show "Bikhri Giri Par Daam Nahin". Where everyone is bearish, including the loud horn of Developer Industry - Mr. Niranjan Hiranandani also admits that prices might fall in one year. Pankaj Kapur of Liasas Foras says price reduction is upon the industry by mid2012. 44 months inventory in Mumbai market at 1 Crore+ is nothing to scoff at.

Again who will blink first or will there be a time correction. Is it possible we have a housing depression?

Anonymous said...

Anon @622am.
The current situation is not healthy, there will be blood on the streets if the prices continue rising. Remember all official channels have been shut. Unofficial channels (goons, politicians etc) know how to extract blood which perhaps Politically influenced on PSU Banks cannot. Remember the number of builders who were popped off during the last boom in the 90's as they werent paying off the goons while not reducing prices either.

Things may not be so bad, as Builders are sitting on SuperProfits even provided they sell. Remember land bought before 2004/5 was dirt cheap in Mumbai. And SuperBuilt up is nothing but additional tax on Carpet Area. Carpet area is a total area of buillding divided by saleable area. So again super profits everywhere. They have holding power, but bank NPA rising, and their borrowing from unofficial sources at >20% per annum will start the sales.

I just hope investors start exiting first. This would establish a downward trend. Also note that the number of distressed property sales in Mumbai suburbs has increased, is an anecdotal evidence of the weakest exiting.....this is a trick le relatively, but it will expand.

polt said...

@VJ,
All bubbles in history have burst. No exceptions ever.
Ours might not pop in a drastic manner, but could be in the form of lower pay hikes, harder to find jobs, etc. A sort of a grind/austerity if you will.

Pawan said...

I see only terror on roads if the bubble bursts.

The govt knows this and that's why they are trying to delay the inevitable. The party has already ended and the hangover is coming soon.

Despite sucking the blood of honest taxpayers, govt tax collection has fallen short of target this year. Govt. will never ever cut down its own expenditure so fiscal deficit which is already expected to be 6-7% this year can only go up. Disinvestment program could get the govt some money but selling in current market will not be easy. Opposition parties will not allow govt. to sell PSUs so cheap.

So the situation is that govt of India's earnings are falling where as expenses are rising. What's the way out for them? I do not see any easy way out.

When economy is slow, there are only two ways to kick start it: govt. spending or private spending.

Govt. has no money to spend. Households are reeling under inflation. What is the way out?

Cutting interest rates in the hope that individuals will start buying more cars and homes is like living in a fool's paradise. Japan failed at it. US has failed at it. Europe is soon to fail at that. We are no different.

The only thing I see ahead are problems. Lets see how the govt. pulls the country out of this mess.

As for RE, price-to-rent ratios are 5 or more in all metros. This is insane and unsustainable.

Ankan said...

Awesome blog, very informative too.

Anonymous said...

Cutting interest rates is the way to go. But that's not enough. There needs to be more fiscal stimulus. We are in a global economic depression.

The monetarists are wrong. Dead wrong.

Ankan said...

Lots of great reading.

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