MYSORE: When Bangalore sneezes, Mysore catches a cold, says a veteran developer borrowing a popular cliché.
He is referring to the sudden fall in property demand in Mysore. After Bangalore, Mysore has been the most attractive real estate investment venue for the moneyed Mumbaikars and Bangaloreans.
Despite claims to the contrary, Mysore realtors suddenly find themselves in an unenviable situation. The value of the sites and apartments, according to reliable sources within the industry, has come down by 15 - 20 per cent in just about three weeks.
Mysore has, in the recent past, been drawing investors in droves from within and outside the states after property prices of Bangalore had hit the roof. Even the "neo-rich" IT personnel found Bangalore property scalding. There then took place a race for prime plots in the nearest "Heritage City." In terms of 'quality of life' such as greenery, good roads and less crowd, Mysore beat Bangalore and the big players like Sobha Developers, Brigade Group and Leo Builders made Mysore their home.
Sources with Mysore Chapter of Builders' Association of India (BAI) told DNA the enquiries for apartments and luxury villas have gone down by 30 per cent since October second week. This has left them wondering what was happening. Have they made a miscalculation or is it a temporary slump, nobody really know.
Pradeep, a real estate dealer who has been in the business for the last two decades says, "Mysore never saw the kind of demand it witnessed in the last few years. Sites were sold before they hit the advertising board, just five years ago.
Plot after plot, even in suburbs, was blocked by potential builders who wanted to cash in on the growth. But the fall in demand taking place in the past few weeks is alarming."
Sub-registrar's office which otherwise used to be doing brisk business with 8 to10 registrations a day, now has just one or two," he said. This, he points out is despite this being a festive season when people planned major investments.
"Last year this time, registrations touched an all time high with an average 30 a day." said a lady clerk working at sub-registrar's office.
According to BAI sources, the situation was aggravated by many factors, besides the psychological slump. Nagesh, who has been working closely with BAI says, "When land was earmarked for SEZ near Mysore, industries rejoiced. But, the power scarcity proved a big blow. Slow progress of infrastructure development and political instability added to the woes. It was thought, Mysore, which had earned a major chunk of funds up to Rs 1,800 Cr under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) would wean away many big real estate players from metros. An airport was also thrown in to woo investments. But, nothing seems working.
Now, Mysore has turned into an investor's nightmare with sharp decline in prices at the peak of the season. Apartments or luxury villas find no takers," Nagesh adds.
The nearby Hassan district, which too witnessed a similar growth as Mysore in the recent years has also witnessed a fall in demand and consequent prices.
Developers seem indeed perplexed at the situation. Apart from announcing lollipops and hoping that situation would improve, they are devoid of any fresh ideas.
"We have announced attractive plans and packages with great returns. We just hope the markets will get better," Nagesh says.
The upshot of it all is that realtors are unwilling to climb down, and investors are equally vehement. The result is stalemate.
He is referring to the sudden fall in property demand in Mysore. After Bangalore, Mysore has been the most attractive real estate investment venue for the moneyed Mumbaikars and Bangaloreans.
Despite claims to the contrary, Mysore realtors suddenly find themselves in an unenviable situation. The value of the sites and apartments, according to reliable sources within the industry, has come down by 15 - 20 per cent in just about three weeks.
Mysore has, in the recent past, been drawing investors in droves from within and outside the states after property prices of Bangalore had hit the roof. Even the "neo-rich" IT personnel found Bangalore property scalding. There then took place a race for prime plots in the nearest "Heritage City." In terms of 'quality of life' such as greenery, good roads and less crowd, Mysore beat Bangalore and the big players like Sobha Developers, Brigade Group and Leo Builders made Mysore their home.
Sources with Mysore Chapter of Builders' Association of India (BAI) told DNA the enquiries for apartments and luxury villas have gone down by 30 per cent since October second week. This has left them wondering what was happening. Have they made a miscalculation or is it a temporary slump, nobody really know.
Pradeep, a real estate dealer who has been in the business for the last two decades says, "Mysore never saw the kind of demand it witnessed in the last few years. Sites were sold before they hit the advertising board, just five years ago.
Plot after plot, even in suburbs, was blocked by potential builders who wanted to cash in on the growth. But the fall in demand taking place in the past few weeks is alarming."
Sub-registrar's office which otherwise used to be doing brisk business with 8 to10 registrations a day, now has just one or two," he said. This, he points out is despite this being a festive season when people planned major investments.
"Last year this time, registrations touched an all time high with an average 30 a day." said a lady clerk working at sub-registrar's office.
According to BAI sources, the situation was aggravated by many factors, besides the psychological slump. Nagesh, who has been working closely with BAI says, "When land was earmarked for SEZ near Mysore, industries rejoiced. But, the power scarcity proved a big blow. Slow progress of infrastructure development and political instability added to the woes. It was thought, Mysore, which had earned a major chunk of funds up to Rs 1,800 Cr under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) would wean away many big real estate players from metros. An airport was also thrown in to woo investments. But, nothing seems working.
Now, Mysore has turned into an investor's nightmare with sharp decline in prices at the peak of the season. Apartments or luxury villas find no takers," Nagesh adds.
The nearby Hassan district, which too witnessed a similar growth as Mysore in the recent years has also witnessed a fall in demand and consequent prices.
Developers seem indeed perplexed at the situation. Apart from announcing lollipops and hoping that situation would improve, they are devoid of any fresh ideas.
"We have announced attractive plans and packages with great returns. We just hope the markets will get better," Nagesh says.
The upshot of it all is that realtors are unwilling to climb down, and investors are equally vehement. The result is stalemate.
11 comments:
Bangalore techies are responsible for the skyrocketed prices in Mysore. Mysore was a tranquil city. The sudden spurt of IT boom made it a desirable place to settle down. Now that the demand has waned, we will see a drastic slide down.
Boom or no boom, the people of non south indian origin have made/are making a biggest mistake in buying property in Mysore. It wont be long before they will be driven out just like what is happening in Mumbai.
Mysore is a lovely place no doubt but has nothing to warrant the kind of run up of real estate prices. It was almost as if it had become an extension of Bangalore. With almost no real economy except tourism, this was a bubble waiting to burst
Article in Time Magazine,
Mirroring the US, India's Real Estate Sector Melts Down
The country's growth estimates of 9% at the beginning of the year have been revised to well below 7%, and the effect is directly visible in the realty sector. "No one's buying anymore," says Ashwani Shukla of New Delhi-based Triveni Associates. "Two years ago, 25-year-olds earning fat pay packets from [multinational corporations] were buying high-end apartments. Now there are no takers for flats selling at 20% markdowns. Estate agents are finding it difficult to even meet daily overheads."
The key phrase in the above article being:
"So many transactions were taking place between speculators and investors that no one bothered to find out what the end user, the family who would eventually live in the house, would be willing and able to pay," Shukla says.
This about prestige constructions... this is the mail thread of house owners and their comm with Prestige Chairman...
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I would like to bring to your and all other owners notice that the “CLOUT” word was used when I questioned him about the delay that this accident may cause in PSN completion.
I asked him specifically that the government bodies/ bureaucrats might delay the clearances for vested interests, he used the word “CLOUT” at this juncture.
Let me clarify his statement once more so that I am not misquoted either by owners or Prestige.
“We have enough clout in the system to get the clearances as soon as possible as we are confident about our systems, processes and quality. The government offices shall not keep the clearances pending as we have enough clout there and hence we do not see any interruption or stoppage of work at the site”.
Hope the same clarifies.
Warm regards,
Veerendra
--------------------------
It is distressing and embarrassing if we should "accept" a statement
of self-incrimination as a confidence-building measure. Since when
did clout become a unique selling proposition?
What are these 'concerned departments' where he has the clout he
claims? What is being compromised in the bargain? What kinds of
clearances are being bartered or bought? Their PR machine cannot try
to hide this blatant indifference to policy and due process.
Do they think that this "clout" will be a good substitute for quality
and transparency? Shame on Prestige. Indeed a sad day for us buyers.
From an earlier mail, they seem want blind reinforcement of
their "leadership" ... yet act in ways that are fundamentally so
backward and third world.
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I am not sure if I would ever agree to evaluate a builder based on his having :
"enough clout in the bureaucracy to get the clearance from all concerned departments"
If 'clout' is being used to get clearances and not 'standards' it may be good for the builder but disastrous for people who use the facility based on pillars of such clout.
While I have no means/expertise to get clinical on the reasons of collapse, this kind of irresponsible statement from a person who I thought was responsible, begins to worry me.
I would rather believe these clouts are more of often than not directly propotional to money you pay, and has the ability to melt faster than ice when comes under public lens. Hence the very mention of this in a public forum may be detrimental to our cause.
Hoping the group - a sensible bunch that it is - will not get blinded by such statement and look for proof of right standards that are being used to get clerances and not clout.
Rgds
Tapas
####################
Look at the panic/change of tone among prestige shantiniketan owners after the arrest of its chanrman..
#############
Ok. I fail to understand the reason for arresting a whole shebang of
people including corp-vp, chairman etc. Whatever happened to fact
finding teams to ascertain the cause and then assign blame? I think
it is politics at it's best. May be someone in govt is trying to
upgrade his/her image as a tough guy at our expense.. I hope this
does not boil down to too much delays.
BTW.. I am not saying these people are not directly responsible for
this. May be they are. But this kind of reaction from Govt just looks
too cheesy and knee-jerk at this time.
-Balaji
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This is rather unfortunate, unfortunately this is the way our system
works. It works on a single point of focus ... how to make money and
survival. Hunt with the hounds and run with the rabbits. Their biggest
thorn is only the Media.
BTW - should we delete the 'clout' posting from the forum? Not that it
is anything which people don't know but still, just a thought.
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This project would now be delayed since no Govt agencies would take any chance.Any small violations of building plans would be shown as reason for non clearence. It is difficult to foresee any authority giving clearence for occupation
It looks like Prestige has to really meet quality standards which will be scrutinized minutely.
Not sure they have the resources and cash flow to rework on quality since the contractors are demoralised after the arrest of the VP.
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The politicians and bureaucrats know to hit where it hurts the most. There are opportunists who want to make a living out of this incident or vested interests who want to tarnish the image of Prestige. Sure we have our own disagreements and differences with Prestige management, but I personally would NOT like to see the whole Senior Management to be behind bars. Not that I am trying to defend anybody or justify anything here, but I too fail to understand the rationale behind the drama of the police department.
If the police department is really worried about the safety of people, they should apply the same principles and be arresting the transport minister for the poor infrastructure that kills hundreds of people in road accidents every month. Or the home minister who fails to protect the citizens from terrorist blasts.
The bottom line is we need to ensure that we as customers are shielded from the impact of this incident. We should not be victimized into paying the price for whoever is responsible for this.
Thanks
Ganesh
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I think that we got to be fully with Prestige at this testing time. the polititions and police would benifit swendling for their own sake. let us be united and face the threat as a construction accident .. let us only concentrate as to how we can get the possession as planned. rest every thing else is immaterial.
Major
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This is rather unfortunate, unfortunately this is the way our system
works. It works on a single point of focus ... how to make money and
survival. Hunt with the hounds and run with the rabbits. Their biggest
thorn is only the Media.
BTW - should we delete the 'clout' posting from the forum? Not that it
is anything which people don't know but still, just a thought.
##############
Look at the above paragraph; tone is changed to 'panic'....
Real estate developers likely to cut prices
Taneesha Kulshrestha
New Delhi: Indian real estate developers are expected to cut prices by 30% and more over the next three to six months. At a recent TiE-Indian Angel Network, summit in the capital, industry players including real estate developers, private equity players and real estate brokers and consultants, all answered in the affirmative when asked whether they see the possibility of a price cut in future.
Click here to watch video
The Indian realty sector has been in a meltdown over the past few months. Prices for both commercial and residential property have come off by 20-25% over the past few months. Industry experts and players say they expect them to go down further.
Real estate builders Kailashnath Group’s managing director and owner Sanjay Khanna says those who are not reducing prices now will be forced to do so in some time. Yet another real estate developer Ashish Mathur, head of business development and marketing for Mahindra World City simply says, “Yes they will”, in answer to Sanjay Bansal’s question on the 30% plus fall for realty prices coming forward.
Anil Chawla, private equity head for of DE Shaw & Company, one of the biggest private equity investors in real estate in the country, says he also expects the prices to fall. “I have already begun hearing rumours that some developers are planning major price reduction plans by Diwali,” he says. Similarly Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj, one of India’s leading real estate consultants and brokers, says that there are definite prices discounts available for people who are willing to pay upfront even now. “They may get 30% to 50% discounts even now,” he says.
There are several factors going against the realty sector. The main one is the lack of demand from homebuyers and the slow off take and over supply of commercial real estate.
In the case of residential property, the rate of interest on home loans has gone up from around 7.75% in 2004 to around 12.75% now. Almost 90% of home buyers take the home loan route. For a person taking a home loan, the rate of interest has increased 5% in the last four years. If a person borrowed a lakh for 20 years at 7.75% in 2004, he would have to pay around Rs 96 thousand as interest eventually. At the present rates, the interest rate burden has now increased to more than Rs 2 lakh on the same amount. Also, as home loans become expensive, the slowing Indian economy and the global financial crisis have translated into a liquidity crunch. So even if someone is willing to get a home loan at a higher rate, the banks may not have the money to lend.
In case of commercial property, the slowing economy has meant that companies are shelving hiring plans and cutting back on production. Both imply they require less commercial space. According to a report on the Indian office market by CB Richard Ellis, a global real estate consultant, seven major Indian cities including Delhi, Mumbai, Kolkata and Bangalore showed a marked decline in demand during the quarter ending September 30. The report also said leasing of office space had slowed down in the first two quarters of the year.
All these developments seem to point to one thing - that the market seems set for a price cut going forward.
re: Prestige Shantiniketan
The company is trying a bailout through one of its invisible promoter, a certain godfather known by his acronym 'MR' . However, they have been told to go to hell after paying his dues/investments.
My guess is that this project will likely to remain unfinished, and those who have invested in this project, my advise is not to pay further installments until the projected phases of construction are complete.
As regarding 'CLOUT'
The promoters do not have any CLOUT in Karnataka. The invisible hand has already withdrawn from this project fearing a market meltdown and the resultant monetary loss.
Real estate developers have hardly hiked their rates in the last six to eight months and some of them have not hiked them at all. Property analysts say this scenario is different from that witnessed between April and October 2007, when developers hiked rates by as much as 24% to 32%. According to a pan-India survey of local brokers in the residential property market, carried out by global research analysts Edelweiss, around 80% of brokers across India have witnessed a reduction in enquiries over the past month, and about 90% have seen a drop in transactions over the past month.For more view- realtydigest.blogspot.com
There was a news item now on CNBC that a lot of realty cos have rushed to the banks asking for injections of liquidity and a plea to reduce housing loan interest rates. The banks were apparently not amused and asked the realty cos to reduce the prices to start the cash flows. I wonder why everybody but the real estate fellows can see the writing on the wall. If they do not reduce the prices (to a reasonable level) nobodys gonna buy.
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