Wednesday, April 11, 2012

Mumbai is the world's least affordable home market

Article Link

Bloomberg research shows a 100-square-metre luxury residence in Mumbai costs about $US1.14 million, or 308 times the average annual income in India, based on calculations from a housing index compiled using 63 markets by Knight Frank LLP and income estimates of the US Central Intelligence Agency for purchasing-power parity in 2011.

“There are big differences in wealth levels in emerging markets compared to the developed world, which is part of the course for economic development,” Bailey said in an e-mailed response to questions. “In the first phase of growth some people make big fortunes, it takes time for this to trickle down as the middle class develop and generate their own wealth.”

This guys have no clue on why prices are so high in Slumbai. It is politician, builder, mafia nexus which does not let prices down and does not create infrastructure to increase land supply.

261 comments:

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Anonymous said...

simple. get your money out of lic. get a term insurance.

Anonymous said...

Anon @2:40

The point that I was trying to make with respect to some gulf middle eastern countries is that for the citizens and expatriates living in this part of the world, basic human rights like food, clothing, housing, education and quality health-care is taken care of very well, this in no way reduces the gravity of the matter that rulers here too get away with a lot of oil wealth.

That is all that I was trying to say vis-a-vis our situation in India where all of the above are luxuries, heck even breathing clean air is a luxury for people toiling in cities like Mumbai.

Anonymous said...

Pawan,
As the article indicates, LIC is doing it for the high yield. Developers might be able to roll over loans, but 16% interest when home sales are down is a high price to pay.
Unless LIC is going to delay interest payments too (which is unlikely to happen).

aam aadmi said...

@Pawan

http://profit.ndtv.com/News/Article/moody-s-reviews-lic-for-possible-downgrade-303115

Everything has consequences.

RealityFool said...

// Black money is the symptom and not he cause. One also need to understand that Bl.Mo. in India has been for ages and we never saw this kind of insanity. //

Earlier people can deposit their black money in bank accounts and cannot be traced.
After Chidamparam put 50 thousand withdraw limit and PAN card for accounts, People realized they can no longer store their black money in banks and are forced to store in lands and gold.

this also fuels the RE

Pawan said...

Unless LIC is going to delay interest payments too (which is unlikely to happen).

They will. It happened in 2008 crisis when Unitech's payment to SBI was due. It was rolled over.

Everything has consequences.
People will stop giving their money to LIC if their rating is downgraded? Do LIC customers even know who the rating agencies are?

Unknown said...

Foreign players leaving slowly , education is mediacore nd shamelessly expensive , infrastructure just a word , medical facilities don't exist , public transport , population explosion , no one to own any mishap , borders being eaten , the voting class jhopadpatti waalas being more valued then the educated , all kinds of crime is booming , lawless and stupid judges , am tired of writing .. country ??? what country ???????

Anonymous said...

Unknown above, cant agree more! An epidemic, a total collapse is on its way. Its inevitable. Just look at Bangalore. Mumbai might be worse.
'roads' 'infrastructure' are mere words. add to the callousness of swarming people openly defecating. and mind you, a 2BHK will be nothing less than 50-60l. Man! you got to be kidding.

Anonymous said...

and forgot to add, it is pollution and crime infested.

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Anonymous said...

Looks like the economy is in crash mode.

Can Real Estate survive even that???

Any thoughts?

Anonymous said...

heloo

Anonymous said...

// a total collapse is on its way. Its inevitable. Just look at Bangalore. Mumbai might be worse. //

what did I miss? something happening in Bangalore and Mumbai. It is same shit since decades ago..

Anonymous said...

// a 2BHK will be nothing less than 50-60l. Man! you got to be kidding. //

True value of these flats are no more than 25 Lacs. And middle-class people [minus the IT crowd] cannot afford anything above 20 Lacs for 2BHK.

Remember it'd take an average Indian, with an average income, at least 300 years to buy a house at current rates. Too much logic.

Anonymous said...

// True value of these flats are no more than 25 Lacs. And middle-class people [minus the IT crowd] cannot afford anything above 20 Lacs for 2BHK. //

If flats were 25 lacs today, believe it or not people would buy 3 to 4 at a time! I don't think prices will ever fall to this level. Might fall 5% to max 15%. Only way out is now inflation. People who can afford 25 lacs will have start making much more income to make things affordable to them... there is no magic here, only magic is again 'inflation'.

Anonymous said...

// -- Only way out is now inflation. People who can afford 25 lacs will have start making much more income to make things affordable to them -- //

Sure, but can they? From a perspective of a company which outsource jobs, the only reason India is a darling is because it's cheap. Once you start bumping up the salary companies will simply move to other countries (Think Philippines).

Local Indian [small] businesses may or may not be able to keep up with the inflation, to be honest. You can already see ghettos. But then again, massive income disparity is hardly an issue in India (except that this disparity fuels crime and instability).

// -- If flats were 25 lacs today, believe it or not people would buy 3 to 4 at a time -- //

I don't doubt that at all, but that'd be due to our booming service sector and betting on projected future growth.

Anonymous said...

// Sure, but can they? From a perspective of a company which outsource jobs, the only reason India is a darling is because it's cheap. Once you start bumping up the salary companies will simply move to other countries (Think Philippines). //

Sure - one can. E.g. Would you work for wages less than your expenses? of course not. That is why western countries are expensive and move to cheap labor countries. Only way to counter this is to be more innovative and productive.


// Local Indian [small] businesses may or may not be able to keep up with the inflation, to be honest. You can already see ghettos. But then again, massive income disparity is hardly an issue in India (except that this disparity fuels crime and instability). //

Either stay in ghettos and pathetic quality slave life or demand more your service... choose between what you want or what you are given !!

90% Indians will choose subconsciously latter - what they are given. So ghettos it is !!

Anonymous said...

"massive income disparity is hardly an issue in India "

Well, the above is an issue in India and that was the very reason for Anna movement. 80-90% masses feel that corruption is the root cause of this disparity and people in power are looting and stealing money left and right to get their kids settled abroad and daughters married lavishly.

Time is coming when masses would be on the streets and thieves would be hiding.

RE as someone said would correct by 5-15% is totally incorrect. It may overcorrect and the downfall could be around 70%. As someone said if it was 25 lacs people would buy 3-4 flats. WRONG, when the sentiment goes other way, all buyers and people holding RE become sellers. No buyers period. Same happened in US, no one could think of houses selling for 100K USD that were 350K USD at the peak time. Today there are no buyers even at 100K and 4% interest rate.

Get ready for a big U turn for the fake economy ready to take a nosedive for the next decade. Time to end the nonsense.

Anonymous said...

choose between what you want or what you are given !!

90% Indians will choose subconsciously latter - what they are given.


It is true. 90% of Indians have chosen what they were given i.e. they've embraced the corrupt system to such an extent that this has become second nature.

Infact, I'm amazed at the casual attitude and infantile reasoning given by so many educated and smart people that it's no wonder many of us feel that the country has gotten into a state where only a major societal upheval has a chance to cure us of our ills.

Anonymous said...

Well said ANON 2:40. Their days are numbered, once the oil resource is depleted they will eat dates and ride camel. We can then entertain ourselves of them being jockey over the camel and perform racing.

I never ever want to set my foot in any GULF country which is not free in any sense. In US I have Green Card and automatic eligible for citizenship with full rights like any one. What does the sheikh offer?

Before oil boom they hoarded gold and smuggled into India to make wealth. Our politicians collided, later they used our criminals like Dawood and others for various hawala transaction to sustain wealth. We were fleeced then, not any more.

Anonymous said...

http://blogs.reuters.com/globalinvesting/2012/04/30/in-india-not-a-bang-but-a-whimper/

Anonymous said...

////
Anon @1:07 AM said...
http://blogs.reuters.com/globalinvesting/2012/04/30/in-india-not-a-bang-but-a-whimper/
////

That was painful to read.

aam aadmi said...

Above
The worst part is yet to come, with INRUSD at 53 and Brent at $120. OMC's won't be able to hold on to much longer. A major price hike is necessary. Though I don't think politicians have the guts to remove all the subsidies and taxes. What they will end up doing is enacting rationing measures, a return to the dark days of 60's and 70's.

Anonymous said...

Dear Aam Aadmi, you surely can't be serious about the rationing bit!!!

The politicians may think up some new ingenious way to hoodwink the public, but I am not sure something as drastic as rationing will go down well.

aam aadmi said...

I am deadly serious, that's what happens in countries with a truckload of poor people with a socialist mindset to boot.

What are formerly middle class people gonna do when they see that rich people are buying the oil that they cannot afford, are they gonna sit there and reason with themselves, no, they will give in to their ego and say that we want our discount, sell petrol through PDS or something like that. (Mamata Banerjee will definitely make that demand) At the very least you will see people storing and hoarding petrol in their homes, draining their tanks at night to avoid theft. It'll be unofficial rationing as people will be unable to buy more than what they can store.

I expect air travel to become un-affordable within this decade and car ownership within the next. Of course things aren't so simple, there will be alternating periods of recession where oil becomes very cheap as demand disappears. But don't worry slowly and surely we are getting there.

The reality is that we have nothing, we neither have oil nor natural gas reserves, we have lots of coal but what are you gonna run your transportation on..? electricity? good luck with that.

Our only viable option of transportation for the future...the railways have also been run into the ground by our populist policies, one day in future when we need it the most we will find that it has collapsed in one giant heap of dust.

My predictions might look very dire but they need not be, it won't look very dire when it comes to it, collapse can be slow and pervasive as well, people will accept the changes and move on just the way they accept pollution and environmental disasters as part of daily life today.

Anonymous said...

I live in Delhi and the Jal board guys came to our house to install a water meter. I asked them what was the reason and they said so that they can meter who is using how much and bill them accordingly. Fine. I asked them we get water 1 hour in the morning and 1 hour in the evening, what is the use of this expense. We have been paying a fixed rate for the past 10 years. First provide water. This is the state of current affairs in India's capital.

After visiting other countries due to job visits, I think water problem could emerge as a major issue in India. RE is worth in crores but there is no proper drinking water or even enough water to clean ourselves. Most of the ground water would deplete in a few years.

Never buying a 2 crore flat even for 30 lakhs in India.

Anonymous said...

Guys see this :

https://www.facebook.com/photo.php?p...00000130396787

Hmmm...Resulted in a huge jam on ORR... 5km either side.

Anonymous said...

https://www.facebook.com/photo.php?pid=88815621&l=8f4e576316&id=100000130396787

Anonymous said...

The bust in AU and CA continues.

http://www.propertyobserver.com.au/residential/abs-figures-show-australia-s-housing-price-bubble-is-bursting-steve-keen/2012050254514

http://www.greaterfool.ca/2012/05/02/they-have-no-idea/


Our currency is in a free fall, banks are saddled with increasing NPAs, GDP growth is down, deficit is up.
But of course, we are different, prices will not fall here :)

-Polt

Anonymous said...

sad very sad

Anonymous said...

I am following this blog since 4 years, nowdays I notice that there are atleast thrice the number of comments than average. Looks like people who missed the bus are taking out their frustration by shouting bubble, We are all doomed, blah blah here and soothing eachother :-)

Anonymous said...

Many congrats on catching the bus.

Anonymous said...

When there is going to be rampant inflation in basic necessities like vegetables, electricity, water, petrol and wages are not going to keep up with the inflation (e.g. Infy's plan to freeze wages) what good is the pricing levels that exist in the housing market today. do people really lack even basic math skills

Pawan said...

Anon 1:41, you are right.

I have been saying this for 3 years at least that housing alone can not go up 25% each year while other service's cost remains same. Its time to pay more for power, fuel and food. As more and more percentage of people's salary starts going into necessities, the share of luxuries like housing will go down.

You may say the housing bust has happened. However, expect no respite. There will be no winner in this war.

Anonymous said...

ET claims that housing has become more affordable . http://economictimes.indiatimes.com/markets/real-estate/realty-trends/homes-become-more-affordable-in-last-10-years/articleshow/opinions/12959211.cms

However, two additional data points should have been considered.
1. Instead of comparing home prices, the article should have compared prices/sqft.
2. Prices should have been compared in the same/similar locations.

Without these two, it is hard to conclude that homes have become affordable.

Polt

aam aadmi said...

Anon at 11:59
There are more people here now because they have realized that running in the rat race does them no good.

Most of the things that people do or buy, cars, expensive weddings, LCD TV, iPads, unaffordable apartments in shitty places are really things that one can do without in life.

As already pointed out, there is unbelievable inflation coming our way, people would find it difficult paying for basic necessities, housing will be the least of our worries. Perhaps the long standing question of whether housing keeps up with very high inflation will be tested out in the real world.

aam aadmi said...

http://gonzalolira.blogspot.in/2011/02/inflation-hyperinflation-and-real.html

Why real estate prices do not track inflation.

Anonymous said...

Water, Electricity and roads are secondary requirement to many in India. Everybody assumes all other basic necessities will be packaged in RE they buy or will be automatically provided after RE is constructed.

I don't see RE prices coming down in India.. no way. Seen anyone selling for loss?

Anonymous said...

@aam aadmi,

My point was if some one got in the rat race in 2007 and survived 2009, he would be much better off today. Not all things are logically simple. You talk about inflation, see RBI cuts rates even with a depreciating rupee. No guesses on weather you should borrow or save to take advantage. You talk about water and electricity crisis, do people care on spending 2.5k per month on water tanker when their property is worth 60-80L or 20k on installing a UPS. Yes once in a while a recession comes along but I can guarantee the morons in this blog will be scrambling to save their jobs then than buying and of course driving more traffic to this blog saying "I told you so" :-)

Anonymous said...

www.ksmuthusamyfinance.blogspot.com

very interesting insights.

Anonymous said...

Hopefully this time it started in India. We closed all the doors one by one where we could have escaped easily.

Sit tightly guys. It is matter of days now.

Anonymous said...

My point was if some one got in the rat race in 2007 and survived 2009, he would be much better off today.

"The problem with participating in the rat race is that even if you win, you're still a rat!"

:-)

Anonymous said...

//Hopefully this time it started in India. We closed all the doors one by one where we could have escaped easily.

Sit tightly guys. It is matter of days now.//

What has started? what doors are closed? what and why is it matter of days?

I don't see any reason for slow down. Are there not enough high paying jobs in India? Are poor people complaining? Are people stressed to sell their houses? It is just that many people will not buy RE (that is different than many people selling RE for less).

As long as fake and black money is in circulation there cannot be slow down because these act as invisible bail outs and will keep market with cash liquidity. In past black and fake money supply was limited, but not in current times. Do you have enough confidence that in 100 units of notes there will be no counterfeits?

Think. India is way to go if you have ability to attract and put to use black money.

Anonymous said...

Vic and Shailesh,

Put a new article on the new GPA law in Delhi. Looks like a major correction in NCR is coming. LInk is:

http://economictimes.indiatimes.com/markets/real-estate/news-/power-of-attorney-property-deal-ban-wary-property-dealers-call-for-easy-conversion/articleshow/12991116.cms

Pawan said...

I don't know what everyone is talking about here. I just visited a broker with my brother and my head is really spinning.

I visited a particular locality in Delhi where DDA alloted LIG flats for 4L and MIG for 8L in 2000 (or did the dealer say 1995?). These are worth 80L and 1.6 Cr today.

Anonymous said...

//I don't know what everyone is talking about here. I just visited a broker with my brother and my head is really spinning.

I visited a particular locality in Delhi where DDA alloted LIG flats for 4L and MIG for 8L in 2000 (or did the dealer say 1995?). These are worth 80L and 1.6 Cr today.//

We are talking about absurd sustainable RE prices. These prices will increase with increase in black money and recently fake money. Ask anyone who buy 1+ crores worth property how much white money can produce to pay toward RE... and then be surprised for expected answer i.e. black money HAS to be part of deal or it's no deal.

Try it, your head will spin in opposite direction this time ;-)

Pawan said...

Try it, your head will spin in opposite direction this time ;-)

I asked and I was told by the dealer that he will arrange for loan from bank for 1 Cr out of 1.6 Cr and rest of money also can be paid in white depending upon if the seller has to buy something with white. So its flexible.

And in case you do not know, this year's budget has allowed RE gains to be invested in SMEs and be tax free so no need to ask for black money anymore.

Anonymous said...

Well, there isn't any correction at this moment. Brokers still up with same inflated prices.

Anonymous said...

What we're witnessing is the rebalancing of the divide between the haves and have nots.

Out of the minority eligible for modern accomodations perhaps less than half of them will be owners / landlords and majority will get pushed into a permanent rental class.

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Anonymous said...

Real estate projects springing up far away from CBD with little infrastructure are demanding whopping rates of 1 crore and above! Reason: Ultra Luxury Apartments. What luxury are they providing?? There is not even basic amenities like a grocery shop or even a hospital within 5-10km radius.

Supertech Renesa Noida said...

This is so nice.

Ajay said...

Well, if you compare on PPP basis then Delhi is actually becoming the least affordable home market... especially if you see the slowdown in Mumbai and price hikes in Delhi NCR

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pooja patel said...

100% reality of mumbai home market....it's easier to earn money than finding an affordable house here....

Unknown said...
This comment has been removed by the author.
Unknown said...

No wonder why Mumbai didnt make it to one of the worlds best travel destinations http://www.americanlivewire.com/some-of-the-best-travel-destinations-on-the-planet/

India Property Listing said...

I think Mumbai real estate market is similar to the tulip mania happened few hundered years ago which like all other bubbles ended in disaster.

Mumbai property prices are at ephoric levels. Some area have per sqaure feet rate as high as 1,00,000 rupees, which is just crazy.

It's just the matter of time when the bubble will burst.

Tilak Kumar said...

very good post ,these are useful

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Swapna said...

Great article such good information in real estate thanks for posting
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