Originally Posted by realacres

contd....

21.) My wife will divorce me if I don't buy a house or shall I show her the savings by not buying the house.
WRONG. She will divorce you if you do buy a house and go bankrupt trying to pay the mortgage. She won't divorce you if you rent a much nicer place than you can buy, and then take her to Paris for a month in an year, which you can do just by avoiding that suicidal mortgage.

22.) Drop in interest rates would make people jump into market again which will increase the prices or atleast won't let RE prices crash.
WRONG. The RE prices reflect the median income of the area. RE market in Pune was largely driven by IT, NRIs & investors. IT industry is slashing jobs or cutting the pays & perks. Due to global economic crunch, NRIs lack funds today. Several investors have burnt their fingers in stock market & they see no appreciation but a RE correction today (some may call it as rates are ‘Softening’). Hence, all these elements that were the main drivers for RE boom are absent today. At the end of the day what matters is whether one can afford EMIs or not. To what extent is priciple amount & interest component is altogether diferent issue. Try to see to it that what is fixed (RE rates) are low so that interest rates fluctuation won't bother you much. The RBI figs. posted by fellow blogger clearly shows how loan dibersement has decrerased despite hike in RE prices. This only means that people aren't simply taking loans. Home loan NPAs are increasing every day passing by. Hence, banks are in no mood to lend further for a highly depreciating asset.

23.) Demand is there hence, drop won't take place.
WRONG. Demand is there but definately not at current levels. Current market is dictated by end users & end users alone. Hence, builders can't today enjoy on investors money & neglect the end users.

24.) No new projects are being announced. This will lead to low supply hence pushing up the rates.
WRONG. Even if 58% of the projects are abandoned, there simply aren't any buyers for the rest 42%. Add to it the investors 40% additional supply which will flood the market this year.

25.) Small correction here & there doesn't amount to crash.
WRONG. The correction of 20% & more, if is small, then another 'Small correction' is sufficient for crash. Consider this as a 'Whirlpool'. Once you are in, you are not out unless you sink to the bottom.

26.) I just want to own my own house.
CORRECT. Most people do and that's fine. Buyers will get their chance when housing costs half as much and they have saved a fortune by renting. House ownership is great - unless you ruin your life paying for it. If you can save even just 10% on the price of a house, you can retire several years earlier than you would otherwise. If you can save 50%, then you can easily take a ten year vacation and still come out ahead.

Conclusion:-

1.) People are simply not spending due to current RE & economic scenario.

2.) Investors aren't there, ending the speculation.

3.) Current market is end user dictated. End user doesn't find rates affordable/logical.

4.) Builder>> End User or
Builder>> Investor/speculator>> End user.
The chain ends with end user. End user is the king. Hence, expect distress sales from investors too.

5.) Result is visible on ground. Builders slashing prices, thus defying PBAP diktat. One builder reduces rates & now it is catching steam that will set off chain reaction for RE crash.

6.) Most importantly, the buyers are not homeless. They have a house even if it means rented one. Those who want to upgrade from 2BHK to 3/4BHK have put their plans on hold, as they too are not desperate. Due to several layoffs, people are going back to their native place, thus increasing the number of flats on rent.

7.) Several news posted earlier, clearly indicate that bankers, economic analysts as well as realty observers state that the RE prices will come down by 50-60% from their peak value, irrespective of place, location. These people are neither bears nor bulls, but analysts with neutral perspective.

8.) Most importantly, the holding capacity of buyers is greater than builders. Builders have taken loans from various finance sources with interest rates as high as 20-35%. These are turning defaulters & if they want the finance institutions not to put an attachment to their properties, they will have no other option but to sell off current inventory a very low rates.

Who blinks first was the question late last year. Today we have the answer:- Builders.

Like it or not, the current Pune RE scenario is similar to that of a ship heading inside the ‘Bermuda triangle’. What is visible today is just a deflection of ‘Compass’. Once it reaches the epicenter of the ‘Bermuda Triangle’, no one can help it from sinking.

To conclude, the builders require your money. So, whom should you believe? Facts or theories put forth by boomers? Think for yourself.

I would be very glad if you can share your thoughts on my article.
Comments most welcome & I would be happy to hear from you.

Regards,
Realacres

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