Several deals to rebuild old housing complexes have fallen through. DNA reports
MUMBAI: With the property market showing bearish tendencies and liquidity crisis plaguing developers, redevelopment projects in the city are being dropped like hot potatoes.
The once headline-grabbing deals, including Vivek society, the Kalina complex where 550 sq ft flat owners were offered upwards of Rs2 crore per flat, have fallen through with developers backing out of MoUs with housing complexes.
The schemes involved pulling down old housing complexes and rebuilding them, with the enhanced FSI, so that the existing flat owners get bigger houses and the builder benefits by selling the excess houses. A seemingly win-win situation till a few months back, there are no takers for it now.
Wadhwa Builders is learnt to have cancelled plans to redevelop Vishal Nagar in Borivili (east). A MoU signed by Pune-based Kumar Builders to redevelop Khira Nagar on SV road at Santa Cruz (west) has fallen apart. Revoking his earlier offer of Rs300 crore, a developer is now willing to pay barely Rs220 crore to a cooperative housing society on a 7,000-sq yard plot at Vile Parle (east).
A well-known developer is learnt to be now renegotiating the redevelopment deal with two societies: Flying Carpet and Tirupati located near Khar Gymkhana. Turn to p12
Instead of his earlier offer of providing an additional space of 35% to every flat owner, the developer now does not want to part with anything over 25%. Similar is the case with Navyug Nagar Cooperative Housing Society on SV Road at Dahisar. Five reputed builders have now offered to provide additional 25% space to the 200-odd residents occupying flats admeasuring a little over 500 sq ft.
“Developers do not have the money power,’’ said a Santa Cruz-based broker-turned-developer, adding, ``With the result, they are unable to pay the exorbitant rate they offered earlier.’’
There is another reason, says Harendra Pandya, vice-president of Real Estate Agents Association of India. ``Redevelopment of societies has not taken off as developers are finding it unfeasible to pay the current stamp duty rate to convey (transfer) ownership of land from a society constructed in the 1980s to its name,’’ Pandya said.
“The already dipping sales are affecting their cash flow and if they have to pay high stamp duty for redevelopment, it would make a big dent in the developers’ calculations. No wonder redevelopment deals are going slow,’’ he said.
On 11th Road, Khar, a society of 14 members have grudgingly accepted a developer’s bid to give only 20% additional space to its existing 1,000 sq ft flats. ``Negotiations had broken down between us as a well-known developer had offered to give them a huge corpus. Six months later, they came back to me as the developer had started making excuses,’’ said a suburban developer.
Said Kalina-based estate broker Umesh Lad, “Redevelopment deals of societies like New Vinay, Shanti Niketan are learnt to have not materialised as a developer backed out from his earlier promise of purchasing the flats at an outright rate of around Rs35,000 a sq ft. The societies had earlier got an offer from reputed developers including Kalapatru.’’
Other redevelopment deals that fell through include Vivek Society near Mumbai Unversity, Kalina, with Sterling Biotech backing out from its offer of over Rs40,000 a sq ft, Parkbay Society and Kirti Society where residents have been offered roughly Rs35,000 a sq ft.
Though Boman Irani of Keystone Developers was unavailable for comment, brokers say there are problems in the redevelopment scheme at DN Nagar police station, Andheri (west). Keystone is developing nine ground-plus-four buildings jointly with Vaidehi Akash, a small-time builder, who reportedly raised funds by pre-booking at rates that were roughly 35% less than the market rate
MUMBAI: With the property market showing bearish tendencies and liquidity crisis plaguing developers, redevelopment projects in the city are being dropped like hot potatoes.
The once headline-grabbing deals, including Vivek society, the Kalina complex where 550 sq ft flat owners were offered upwards of Rs2 crore per flat, have fallen through with developers backing out of MoUs with housing complexes.
The schemes involved pulling down old housing complexes and rebuilding them, with the enhanced FSI, so that the existing flat owners get bigger houses and the builder benefits by selling the excess houses. A seemingly win-win situation till a few months back, there are no takers for it now.
Wadhwa Builders is learnt to have cancelled plans to redevelop Vishal Nagar in Borivili (east). A MoU signed by Pune-based Kumar Builders to redevelop Khira Nagar on SV road at Santa Cruz (west) has fallen apart. Revoking his earlier offer of Rs300 crore, a developer is now willing to pay barely Rs220 crore to a cooperative housing society on a 7,000-sq yard plot at Vile Parle (east).
A well-known developer is learnt to be now renegotiating the redevelopment deal with two societies: Flying Carpet and Tirupati located near Khar Gymkhana. Turn to p12
Instead of his earlier offer of providing an additional space of 35% to every flat owner, the developer now does not want to part with anything over 25%. Similar is the case with Navyug Nagar Cooperative Housing Society on SV Road at Dahisar. Five reputed builders have now offered to provide additional 25% space to the 200-odd residents occupying flats admeasuring a little over 500 sq ft.
“Developers do not have the money power,’’ said a Santa Cruz-based broker-turned-developer, adding, ``With the result, they are unable to pay the exorbitant rate they offered earlier.’’
There is another reason, says Harendra Pandya, vice-president of Real Estate Agents Association of India. ``Redevelopment of societies has not taken off as developers are finding it unfeasible to pay the current stamp duty rate to convey (transfer) ownership of land from a society constructed in the 1980s to its name,’’ Pandya said.
“The already dipping sales are affecting their cash flow and if they have to pay high stamp duty for redevelopment, it would make a big dent in the developers’ calculations. No wonder redevelopment deals are going slow,’’ he said.
On 11th Road, Khar, a society of 14 members have grudgingly accepted a developer’s bid to give only 20% additional space to its existing 1,000 sq ft flats. ``Negotiations had broken down between us as a well-known developer had offered to give them a huge corpus. Six months later, they came back to me as the developer had started making excuses,’’ said a suburban developer.
Said Kalina-based estate broker Umesh Lad, “Redevelopment deals of societies like New Vinay, Shanti Niketan are learnt to have not materialised as a developer backed out from his earlier promise of purchasing the flats at an outright rate of around Rs35,000 a sq ft. The societies had earlier got an offer from reputed developers including Kalapatru.’’
Other redevelopment deals that fell through include Vivek Society near Mumbai Unversity, Kalina, with Sterling Biotech backing out from its offer of over Rs40,000 a sq ft, Parkbay Society and Kirti Society where residents have been offered roughly Rs35,000 a sq ft.
Though Boman Irani of Keystone Developers was unavailable for comment, brokers say there are problems in the redevelopment scheme at DN Nagar police station, Andheri (west). Keystone is developing nine ground-plus-four buildings jointly with Vaidehi Akash, a small-time builder, who reportedly raised funds by pre-booking at rates that were roughly 35% less than the market rate
40 comments:
Make no mistake: It is neither a slowdown in RE not a correction. We'll soon be witnessing a major crash.
Ignore the bearish spinmeisters. Put on your thinking gear and start looking for opportunities as the crowd keeps waiting for crash. Go against the dumb money:
http://rightadvice4u.blogspot.com
While no one has a crystal ball, the fact is that IIP is 3%, Inflation is 11.9% and interest rates are the most severely negative in 15 years of my corporate life. Interest rates can only go up from here if the government is serious about inflation. Also think about why USD is 1 cent away from being lowest ever against Euro and breaking records againsts NZD, AUSD etc. and has yet strengthened 15% against the rupee in the last one month.
Meanwhile, last week, when I had mentioned about rates in Pune crashing, I was flamed with very unfortunate words. Now you can see more information at ravikarandeekarsblog.blogspot.com.
"Meanwhile, last week, when I had mentioned about rates in Pune crashing, I was flamed with very unfortunate words. "
Which 'unfortunate words' made you feel like you were flamed? If you express your opinion, it is likely to be contradicted by those opposed to your viewpoint. In the meantime, notice the language coming from your side of the fence and decide which camp is more agitated.
I think you are referring to Ravi's blog about Samrajya project in Pune. The greedily priced project (way above the prevailing price in Kothrud area) had to be marked down. I have seen this project mentioned at least in 3 different blogs. This is premature celebration. Anytime bears see an isolated project's price marked down, for them it is like frst step in the crash. I can list 5 projects in West Pune where prices have gone up in last 6 months. Should I say the boom is starting? As far as I am concerned, I have accepted the possibility of a mild pullback. But a crash or a big correction? No way!
http://rightadvice4u.blogspot.com
Dear Boss,
The way you have accepted a mild correction you'll also accept a major correction and a crash eventually in a year or so as time passes and facts come out.
I hope that RE can hold on to these values.
I said I have accepted the 'possibility' of a mild pullback. Even after that I bought a house because a possibility of a short term pullback doesn't matter in my scheme of things!
I wonder if all the bears will accept the reality if the crash doesn't materiaize. I think they will continue to deny it like they have been doing for last two years!
http://rightadvice4u.blogspot.com
Dear Boss,
If the crash doesn't materialize, then the prices will stay stagnant for a long time, maybe a decade or so to adjust for inflation.
I also have 3 flats in Mayur Vihar area totalling more than 2.5 crores as of today. I don't find these prices realistic. I cannot even sell them as I've given 2 of them to family members to stay and I'm living in one.
I do feel that with Indymac going down in US, and Freddie/Fannie shit coming next week, Lehman Brothers having a very bad balance sheet will have a spill over affect all over. Just because most of these agancies packaged their loans as MBS/CDS and sold them all over the world. Indian stockholders are also sitting on a lot of them which are due to collapse.
You seem to have a very small perspective but I'm looking at things from world economy perspective. This is a world wide phemonenon that has happened and not just because of growth in India. And the main culprit who let this happen is Alan Greenspan from US who flooded the worldwide market with so much easy money after 911, that it became out of control. Sensex will be down more than 1000 pts next week due to US financial crisis and foreign investors will pull out retirement funds of US citizens invested in emerging markets.
Happy buying and selling. Cash is king.
I would say that the crash people have mentioned here would definitely come if Israel attacks Iran, as it will take price of crude oil to at least $300 pb and will have negative consequences all over.
Otherwise, there would still be a worldwide recession and property prices will take a hit. Why, because there would be a liquidity problem all over. Banks would make it hard to make loans (if banks have any money remaining), interest rates would be higher, if the commodity bubble doesn't deflate inflation would be a killer and one of the market killer would be negative sentiment. Once masses know the properties will not appreciate, there would be a huge inventory.
To clear the inventory builders will start offering big discounts and then major discounts. And if there are a lot of speculators who bought to sell and cannot afford loan payments anymore, banks would take over a lot of these properties. These would be sold as distressed RE at low prices which would set low prices for the entire neighbourhood.
Happy buying and selling. Cash is king.
I don't think there will be a crash in real estate mainly because most of the new flats bought in the metros seem to be second or third houses by returning (or not) NRIs, IT techies, ESOP lottery winners etc.. SO they are not likely to convert them into cash any time soon. However there will be an inflation corrected drop by about 40-50%. For example in Mumbai real estate prices in a suburb like Ghatkopar stayed at 3000 from 1996 to 2002. That is a 60% drop in inflation adjusted terms but a steady market in nominal terms.
Be ready for the rerun - we have completed one year of the expected 6 BTW.
As investors, blog writers and the educated elite in India it is our obligation to go beyond the headlines and rhetoric. Over the last one month, across multiple blogs, I have noticed the following reasons for an imminent crash in the Indian markets (amongst many others):
1. Japan RE crash of 80's.
2. US sub prime crisis
3. India's RE markets falling or stagnant between 1996-2001.
4. Crash of US banking stocks
5. Crash of Indian stock markets.
In writing their comments and blogs, people have invoked their favorite demon depending on the magnitude of the doom they wanted to communicate. Unfortunately, it is not working. It's time these prophets of doom had a relook at their analogies and accepted the fact that there is little or no correlation between some of the events I have pointed out above and the current state of the Indian RE markets.
Ponder on this:
1. I feel it will be incorrect to characterize the entire Indian market to be caught in a bubble. Some of you who are sock market investors have probably seen the carnage unfold in the US markets (not to mention the Indian market meltdown) over the last several months. Over the last 3 months, the Dow is down by approx. 10%, Merill Lynch is down by 35%, Morgan Stanley is down by 28%. However, even in a market unable to find a bottom there have been winners such as Apple which is up about 18% and Research in Motion (manufacturers of Blackberry) is up about 6%. The point I’m making is that it is possible to find gems even in a downward moving market. Infact, to extend this analogy further, I would say the prices in Tier I cities are by and large within fair price range. The real problems are with Tier II and Tier III towns (Just about two years ago Tier II and Tier III were the new hope for RE investors who missed the Tier I bandwagon!).
2. To all those appalled at Rs.1 cr aptts, this is what I have to say. Rs.1 cr certainly should not be the median or even average price of an apt in India-especially in cities like Pune (which at best can be decribed as Tier II aspiring to Tier I).
Having said that, I would encourage all potential investors with a real desire to make good investment decisions to take a relook at the market. Stop classifying the entire market as one big bubble. There are unscrupolous elements in every market and RE in India is no exception. If your intention is to crucify them, you are doing a good job. If your intention is to make money, you are on the wrong road.I have written about this on my blog www.meridharti.com under post of 9th June.
Over the next several years, I predict the following trends in the Indian RE markets:
1.On average, apartment sizes will get smaller (see my very first post on apartment sizes at www.meridharti.com). This means the total cost of ownership (TCO) will fall. However, do not confuse that with falling prices since psf rates will continue to rise. Infact, smaller apt. sizes will fetch a premium (again I have explained this on my very first blog post).
2. "No frills" apartments will become a reality rather than a rarity. This will again reduce TCO but don't confuse this with falling psf prices either. Make sure you make an apples to apples comparison. Cheaper doesn't necessarily mean prices have fallen-see if you are getting same facilities, specifications and build quality.
3. Regulation will force builders to quote prices on carpet area rather than super built up area. Read my post dated 28th May,08 on this topic at my blog www.meridharti.com.
later,
Ashish Abrol
www.meridharti.com
Dear Ashish,
Good post. But can I ask a quick question. If there is a financial crisis and banks don't loan the money easily either to buyers or builders or the interest rates are high and if builders are not able to get money from investors in the stock market: Would your 3 points still hold as a prediction for the future years? Or you are basically saying that builders would start deteriorating the quality of houses and keep their profit margins high as they are used to high profits now.
One thing I did like to mention is that India is not independent from the world financial markets and would face the consequences in case of a financial crisis even in US.
As regards to Blackberry and Apple, look at their product. They are selling their product big time based on value and not speculation. iMAC, MACPro and Iphone have penetrated major market segments of the world and Blackberry has become defacto of all data over PDAs. These companies have good balance sheets. Steve Jobs is not a stupid banker who is gave out loans to everyone. The financials are the ones that gave out loans to every Tom,Dick and Harry thinking the RE never goes down and they have the house as a collateral(in US).
Ashish, time will tell. I hope I'm wrong and I want to be wrong. I myself have 2.5 crores worth my own flats plus another few crores worth of property my wife inherited. I've been writing on this blog with no biases towards doom or being a bear. I tell all my friends to be cautious in this market as either it stays same or goes down. This is my opinion.
Btw, do you know how much exposure ICICI bank has in the world market?
Happy buying and selling. Cash is king.
One other thing I wanted to mention since many people compare us with the US. US is a watermelon and India is like a small grape in front of US when it comes to technology, innovation and money.
There is no innovation here in India. All that these IT companies Wipro, Infosys, Satyam , TCS etc. are doing is jobwork for their clients mostly because labor is cheap in India(getting expensive now).
We can't compare any crash here to US. I would say it could be more widespread than what US is seeing as a lot of Indians are still under poverty. If things do not correct, it may give rise to a lot of crime around cities and the places will become very unsafe.
The writing is on the wall and everyone to see. Prices are dropping and Boss is in denial. As with any market there will be opportunities with distressed sellers and overleveraged investors. But one has to be very careful in these deals. A slight mistake in a downward trending market will be costly for a long time to come.
In US people who bought in late 2007 and early 2008 thinking they got good deeals are screwed as all those forclosed homes have further gone down in prices by 20%. And 20%of and average $300K house is $60K or Rs. more than 20 lacs in just a few months.
I think eventually interest rate movements, inflation, US slowdown, and other macroeconomic parameters only have an indirect effect on house prices. Local income is the most important parameter. The entire frenzy is based on the perception, amply fueled by the investors and builders, that people are going to get priced out of buying a house forever, unless they act now. So buyers are encouraged to leverage themselves to the maximum and buy a flat as soon as possible. As long as they have a job, many Indians extrapolate into the future, counting future wage gains at 15% per year and therefore purchase a house.
When wage gains taper off, and jobs are actually lost in the high paying sectors, the perception will shift. House prices will probably remain stagnant in nominal terms, while inflation catches up to those prices in the future. Brokerage employees in India are now feeling the effects of the slowdown, as their commissions and trading income shrink by half. As IT/ITES techies see stagnating wages, and maybe a few of their colleagues get laid off, their perception will shift. NRIs, who themselves may be affected by job insecurity, and the realization they are paying developed market prices for properties in one of the poorest countries in the world with shoddy infrastructure, may also hold off.
For investors like Ashish and the "Boss", they will have to redouble their marketing efforts in this stagnant period, and counter the perception that property prices will not appreciate. They are trying hard, but other investors and buyers will need a lot of convincing. Unless they can unload their properties, they will suffer inflation adjusted losses on their investments.
Observer.
All the points laid down by bears are obvious, like writing on the wall as Vik says. I am afraid it is
too obvious to pan out in the way everyone expects. You might have read by now about the Fed's efforts to bail out Fannie and Freddie. Don't dismiss it as a desperate attempt to save the sinking ship. It will be foolish to igore the power of Fed. They are determined to protect the guilty parties involved in subprime and forcefully bring the wrecked train back on track. Like Bear Stearns, they will rescue other financials Fannie, Freddie, Lehman and more. People can discuss forever whether this is good economics or bad (I think it is bad by the way). But the easy money will soon find its favourite targets and emerging markets are likely to be one of those.
In the meantime, individual investors and more importantly first time home buyers should not be indulging in pedagoguery like analyzing US slowdown, global meltdown, dollar's fall, Iran war, oil's prices, coming death of outsourcing(!) and other pedantic issues like these. It is good to have general knowledge about these but trying to apply it to an individual's investment decisions can lead to classic case of 'analysis paralysis' hampering one's ability to think through the crisis and find opportunities.
I am leaning towards belief that plenty of investment ideas are about to bloom from this swamp of
bearishness.
http://rightadvice4u.blogspot.com
Sounds incorrect though i myself am an investor.
Your point applies well only from invstment point of view.
However, it misses a very very basic point. Any investment is good or bad only after the asset is sold out. If you want to term realty as good investment, it becomes one only if you sell the asset with some profit.
However great it sound to tell people that proeprty investments are good even today, no matter how fancy purchase prices are to be dreamt to sell the asset to get return...an anticipation that we will get even richer people to buy those assets after some time is extrapolated from sentiments of last three years.
but today's scenario is diffeent and already made investments are not getting much returns, outlook from here will be flat and not boomy as you're trying to project. This is fact.
You agree market is stagnat, everone does. But then why it is stagnant. It doesn't need expert to tell answer. It is stagnant because prices have peaked out of market. There is no point in investing further, forget it, investors have to move out quickly to limit the losses.
Add to it, all gloomy (pedantic as u said) factors you told to ignore, they are very much related to local income which turns out to be biggest factor to decide market condition.
Again, it is plain fact that local incomes these days are not sufficient to buy real estate due to high borrowing costs. So naturally sales will narrow down as they already have been in last three to four months. Then why trying to fool people with jargon of sound advices ? buyers already see such advices as traps as it seems to get urself bailed out of trouble..
it ain't gonna work anyway..realty slowdown is there whther u and me like it or not. so lets accept the fact that slowdown is emminent and lets come out with whatever margin we can get for our investments and minimize the damage...
Anonymous said...
"Sounds incorrect though i myself am an investor. Your point applies well only from invstment point of view. However, it misses a very very basic point. Any investment is good or bad only after the asset is sold out. If you want to term realty as good investment, it becomes one only if you sell the asset with some profit."
What's the point of saying this? So if I buy a house and don't sell it, its neither good nor bad? If an investment of 100 rupees turns into 150 rupees in 2 ears, it is definitely much better than it turning into 90 rupees even if you don't sell it. Think of it : if there is a 50% correction from this point and then I sell, wouldn't it be much better to sell it at 75 rather than 45? I don't understand what you are trying to say here.
Your natural scenario of slowing sales and subsequently declining prices has been advocated incessantly for last 2 years. What
about those who listened to these predictions in 2005? Why should they trust it now? Maybe in 2010, there will be even more justification for a correction if the prices continue to climb. It may be OK to caution investors whose sole aim is to get appreciation and income from a house and then exit the trade, but asking first time homebuyers to stay on sidelines doesn't sound all that prudent.
Second question to be answered first '...natural scenario of slowing sales and subsequently declining prices has been advocated incessantly for last 2 years. What
about those who listened to these predictions in 2005? Why should they trust it now? "
- Well, of course if ppl would have listened in 2005, they did it a little wrong as prices zoomed up after that. But then it was a boom time. Everything was going hand in hand, right from low prices, low interest rates, solid growth rates, IIP, rising incomes, lower inflation, less supply..etc.
But same can not be applied now as all above factors have changed direction from north to south. So sticking to same advice wouldn't be prudent choice here.
Then first question ' What's the point of saying this? So if I buy a house and don't sell it, its neither good nor bad?'
- No one said don't ever sell the asset. But its about timing. Just like buyers burned fingers by not buying when things were going smooth, investors will also burn fingers if they don't sell at start of rough weather. For 100rs invested, its better sell when they are at 150. But if this is not going to happen, first try to sell at maximum possible of 100+, if not then sell it at maximum possible of 100- figures. Because if we wait too much, even 100+ figures would return negative profit as cost of money invested if on borrowing will eat away margin money.
Again, its about timing the market, be it entry or exit.
And to answer your last question 'but asking first time homebuyers to stay on sidelines doesn't sound all that prudent'
- The general feeling one get in the market is buyers themselved realized the risks of entering into high debts. There is no question of impact of someone else telling them to beon sidelines. Its and automatic choice buyers have to take due to lack of better options due to limited incomes and unhealthy rise in rates little beyond. So no matter who advices whom whatever..things will not change much ..market has its on way to rise as well as correct.
OK, this is where probably we differ the most. In my opinion, the buyers on sideline are more akin to fence-sitters waiting for an opportunity to jump in. Any hint of a bargain, however small, could push them over providing vital support for prices. I believe there numbers are substantial.
In your view, these potential buyers are turned off by current prices and they won't step in unless a significant discount to current pricing is available. Basically you are saying that there is a huge gap between prevailing prices and the amount this group is willing to pay for a house.
Only time can tell which way the tide will turn!
http://rightadvice4u.blogspot.com
There are lot of variables which go into pricing a house. Location, Builder quality, business proximity, affluence level of neighboring complexes(houses), interest rates and affordability to the target audience. No one can deny there is a slowdown. If you went to a building 2 years ago , interest rates were 8.75% and house prices 50% below today's market. As prices started rising the bubble became bigger and bigger. Now with prices dropping the bubble has popped. I think housing has gone out of the reach of the middle class and will continue to remain so. All the arguments of smaller apts etc are valid. We have seen those apts in Tokyo and other dense places. One Barclys article put inflation at 17%. If this is the case it will take 4 years to inflation adjust prices. 1cr in 4 years will not bu y you much as it did today.
Reading the posts of many of the regulars above what i would like to add here as a mumbaiyya presently living in london is :-
1) There is a paradigm shift taking place in India, economic development based on Industry and services are shifting to regions that were predominanently ignored. With resources being scarce worldwide its the backward states of Bihar, Jharkand, Orissa and Chattisgarh that will be attracting the attention in the next 5yrs - especially in light of the G7 nations undergoing a debatable recession, services will be hit by this - and it is here that we'll be seeing a lot of the dotcom entrepreneurs with experience of the western countries RE markets entering to challenge the traditional indian builders lobby.
why should DOTCOM entrepreneurs come to these states ?
A large section of the navratna PSUs & pvt co in India were located in these states i.e. Bhillai, Durgapur, Tatanagar etc the kids or 2nd gen from these spots went on to join the LNMs and VEDANTAs of the world not to mention silicon valley. These 2nd gen are hitting their mid life crisis and are coming back with sackfull of cash to recreate the success of their employers.
2) This recreation will see the attention move from the metros to the T2/T3 cities. And then because of their middleclass background these entrepreuners will be more scrupulous than the traditional baniya menatality builders.
3) Being a aircraft engineer myself i know the importance of airtransport to the growth of an country or regions economy i.e Dubai & Emirate - worked for them in DXB - . Increasing number of returning NRIs would be interested in moving to these T2/T3 cities having lived in similar T2/T3 cities in the adopted country. This will see the rerun on RE like we saw in Pune/Gurgaon/Noida/Mysore etc. Having said that, my defination of rerun is does not pertain to the price mindles escalation but more to quality living attracting people of similar mindset.
3) The T1 cities as result will see a major drop in demand and consequently price appreciation or stabilisation.
Conclusion: Mumbai in for a huge drop, foll by Pune, Blr, Maa, Del et al.
Ashish, Boss et al.
Once there is a major slump, may take a few years to bottom out, there would be no mercy for people who are over extended with credit.
Pigs will get slaughtered.
The current situation in the financial market certainly suggests that 'anonymous' is probably right.' The Boss' is probably a paid blogger by some real estate company whose job is to inject confidence in the falling market. The very mention of crores of assets he owns proves my point
At least do some homework before you post. It was another person who claimed he owns 2.5 cr worth of assets. He is in your crash/correction camp, so be careful when you talk about him! The financial market situation looks grim. But smart bears have cashed out. Now pedagogues will keep on speculating whether the sensex will bottom out at 12000, 10000 or 8000. Long term investors/opportunists should start accumulating solid stocks.
Now we go back into wait and watch mode for the ever-elusive real estate crash!
http://rightadvice4u.blogspot.com
Some people were in wait n watch for ever-illusive stock crash before few months..sorry boss but it happened.
Some ppl were fearing and some were waiting for ever-ellusive RE crash in US, in india in 90s..again it happened yaar..ab kya karen..
Eventually everything happens. But it doesn't help. I can even predict real estate prices will double. Sometime in future, compared to some past level, they will double. But the value of this prediction is zero. So is the value of people's predictions of RE crash since 2005.
By the way, very few people said Sensex will crash when it was above 20000. Maybe that's why it went down because bulls were overconfident. In case of RE, everyone is shouting from rooftops for a crash. Maybe after all the shouters surrender and buy homes, the real decline might start!
http://rightadvice4u.blogspot.com
And how will shouters surrender if they r shouting in the first place bcoz their income does not allow them to buy thse jacked up assets.
If they had money, they would already have surrendered and bought up asset.
Dirty tricks you guys r playing actually is harming too much to your own interest. More u shout, harder my belief of bigger correction becomes.
If that wouldn;t be the case, why are YOU shouting..just ignore these blogs.
cought u ?
Everyone has a right to shout, that's what the blogs are for :-)
I am just pointing out which side is more crowded. If the crowd doesn't get what it wants in a reasonable amount of time, it gets restless and finally starts thinning out. Many in the crowd probably can buy a house but are waiting in vain for a big correction.
http://rightadvice4u.blogspot.com
'the boss' is obviously a paid blogger, otherwise who has the time to go around multiple blogs and post again and again and again !! you visit any blog or article that talks about rel estate, and you can find his comments there along with his blog rightadvice promoted.
if he was a simple blogger, i would expect his post in 1-2 places maybe but not all over the place, that too hunderds of them , countering argument after another.
(now im sure he will counter my post as well) ... looks like he does this full time..
When people run out of substance, they post useless stuff like calling others paid agents of certain lobby or other foolish things. For trolls like tarun, I usually counter them once and then ignore them subsequently. For those willing to stick with the issue, I can sure spend time, as per my wish, replying to them.
http://rightadvice4u.blogspot.com
ye boomers to toilet main bhi laptops leke jaate honge aajkal..
btw what an out-of-thin-air guess that '-snip-Many in the crowd probably can buy a house but are waiting -snip-'
Lage raho. Spread some more junk. I symphatize with these bosses who are servents of builder/investors.
HA HA.
I understand your desperateness to cerate hype. But you missed the main point in your bla-bla-bla above.
one. You say "there is no shortage of those who can afford to pay.". Ha, what a joke. If thats so, you can find endless articles/reports of Mumbai slowdown. This is happening becoz rates overshot buyer capacity.
Two, you say "the real estate sector is growing at a blistering 30 per cent annually". Pls refer reply to point above.
Three, you kept talking about new developments all over mumbai. Gr8 compilation (or copy-paste from some article). No one here denies that. We all agree new projects will have to be there. But the issue is prices. If prices are not fair, eventually the projects will slowdown, some may delay, some may cut corners. Money can not be generated out of air, it has to be earned / borrowed. Realty boom in last 3 yrs was mainly due to cheap borrowing costs (7% interest rates). Now thats not the case. Rates r getting almost double of that figure. This surely hurts RE, lot of experts said this already.
So dear, open ur eyes.
anom above me, wait for 5 minutes, there will be reply from 'the boss' , maybe he forgot to take his laptop to the loo this time :D
just ignore him i tell you, we all know the slowdown reality, since its RE it will take somewhat longer 1-2 years for falling to affordable prices, then lets see where this boss is.
till then. adios friends.
Hi All, This is a very interesting blog. Some of you appear to be very knowledgeable on the subject. Can you guys recommend a good website/blog for recommendations about Delhi/North India market?
Thanks.
Kapil
Being from Pune I know how the real estate market boomed on speculation and is now crumbling. I feel the same pity for Boss and other hopeful optimists as the others have shown. Reality in Realty is hurting all. But there needs to be serious debate on whether this market bubble will deflate slowly or the bubble will burst all of a sudden.
I am happy to see property falling to realistic rates (30% off from peak now and will ease out at about 10 % more)
However good builders who have a decent track record (ex. for Pune DSK, Paranjpe, Kumar, Rohan, etc) will have slight higher rates than other medium level builders - and overall rates in the suburbs will drop by 15-20% max for new projects from current levels.
The worry now is for people - speculators and agents who bought property as investment at 2006-07-08 rates - judging the ugly side of Indian realty deals where things are more black than white - no one can really estimate what the losses are going to be.
One needs to realistically assess the number of potential and genuine buyers.
(25 lakh or so IT workers in India can only buy 25 lakh houses not more But greedy realtors thought the flow of IT professionals will never ebb)
One thing is for sure - NRIs and people not in debt - will have a nice choice of property to buy in the next 2 years :)
Add to this there are still people with lot of black money. So who is going to buy and what are they pitting/bidding for will decide the rates in the next 2 - 3 years
As a matter of caution if the monsoon fails in many states and leads to drought (like the 98-2002 period) we may see really bad times these 4 years like last decade.
Hello,
The reality is this
Mumbai
Every far off suburb from Dahisar onwards suffers 10 hrs load shedding every day
The traveling can Kill you.
The water can kill you.
so get real....
The prices have to crash and crash big time
All money is being sucked out of the system now.
Earlier the boom rode the low interest thing
Now developers have bought land at rates that they cannot justify
Look at the share prices of all those realty companies which were the toast in Jan 08 Not they are trading at 80% below their peak
Wake up guys this is the begining
We even had news that big builders like Hiranandani had not deposited their employees PF amount. after the article no news in any newspaper on that.
Probaly gave the journos some .... to shut up.
Just like the world over the reality is bringing down the economy.
We are to see the repeat of the US housing crisis in India soon.
wait ... the crash is comming
Today in the ET - 30/07/2008
Real estate prices in bubble zone
Current Market Situation May Not Be Conducive To Property Purchase, Cautions Amar Pandit
THE question that bothers a lot of prospective home buyers is whether they will miss the bus if they wait any further. However, the right question should be: Can I afford to buy a house today? Even if you are one of those blessed ones, the thought should be: Is it a fair price for the house? Your house might not be an investment, but does that mean you should pay any price for it? The prices currently being quoted are simply atrocious. From a time, not too long ago, when people talked about loans of Rs 10 lakh to Rs 50 lakh, today the average loan size is substantially higher.
A simple 2-bedroom house in Malad can cost up to Rs 1.2 crore (including stamp duty and registration charges). This is the price that sellers expect, but this does not mean they are actually getting it. The cost of a similar flat 4 years ago was close to Rs 30 lakh.
The entire real estate boom took off in 2003 on the back of very low interest rates and low prices. However, the situation has changed now with realty prices going up 3-4 times, while interest rates are 60-70% higher. Incomes have certainly not grown four-fold in the past four years. Today, even if you are earning Rs 25 lakh annually, it is extremely difficult to buy a 2-bedroom house in the suburbs.
Even if you make a down payment of Rs 20 lakh, you will still end up borrowing close to Rs 1 crore. This would mean an EMI of close to Rs 1 lakh per month. So, after tax and EMIs, a person with Rs 25 lakh gross income will be left with just Rs 5-6 lakh as disposable income for lifestyle and living expenses. Once you take EPF contributions, you will just be left with Rs 4 lakh annually.
Lifestyle inflation (driving a car, visiting malls, eating out & entertainment), which is much higher than normal living expenses, eats up a significant portion of one’s income. Hence, it is just not possible even for someone earning Rs 30 lakh to service an EMI of Rs 1 lakh every month. Even if you do manage to do it, you will be left with no savings.
So, what should you do? Should you buy a house today? Real estate prices, though location-specific, have been witnessing a slowdown in demand. One might argue that luxury accommodations might not be impacted by this. However, there is a visible slowdown in real estate and prices are down on an average by 10-15% in places like Mumbai. Unlike the stock market, there is no index for the real estate market and no price-discovery mechanism. In fact, the price discovery is very subjective and identical properties in the same building can go for two different prices. If one had a real estate index, it would have had given details on number of transactions. Thus, enabling one to witness the slowdown that has started last year itself.
There have been several reports of builders borrowing at very high interest rates and some defaulting on their interest payouts. In fact, real estate stocks have been hammered the most and the basic assumptions on which their landbanks were valued are a matter of debate now. I believe the stock market here is one leg ahead of the realty market and there is a lot more pain to come in the residential segment. One is also witnessing a lot of projects being delayed and redevelopment schemes being postponed.
Speculators have started to exit since late last year and investors trying to exit now are unable to get the price they could dictate some time back. With rising interest rates, demand should come down. However, location still rules and some premium commercial property could still fetch good money. Not that it is any indicator, but if you look at the price-to-rent ratio (PR Ratio) similar to PE ratio, one can clearly see that the prices are in the bubble territory.
Since there are no margin calls in the realty space, the holding capacity of an investment can be substantially higher than a leveraged exposure in stock market, where margin calls have to be attended immediately. Hence, real estate prices generally do not fall drastically.
Small builders are cash-starved and are not getting into new projects. This is the case with mid-size developers. However, big builders with access to IPO funds and PE funds can wait for an extended period of time before cutting prices. One can clearly see that the discounts offered in the form of stamp duty waivers or furnishings are nothing but a desperate attempt to get end-users.
Like in the stock market, it pays to be patient in the real estate market too. For realty market to sustain itself, there should be a steady inflow of end-users. Speculators and investors can only take it to a certain level. End-users can only come when prices are affordable and for that at least 30% correction is a must. If you have been eyeing a property for some time, don’t just think twice, think several times before you sign on the dotted line. Be patient for the next 12-18 months and you are bound to come out as a winner.
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