Quote:
Originally Posted by realacres
Well said wiseman & sansei.
Wiseman, agree with what you say but who jacked up the RE rates including land at first place? Builders. The price of flats went up & thinking that prices will always go up, builders wanted to sell as much as possible, hence they bought land at higher cost as the land owners then started demanding their pound of flesh from the builder.
Hence,
High cost of flat>> Increase in land price>> Increase in flat prices.
It is a viscous circle.
Today, the value of land banks given as collateral by big builders like DLF,Omaxe, Unitech etc. has fallen by over 55%. DLF even sold it's land at much cheaper cost than market price in May 09.
In Baner. a plot which was going for INR 2100/sq ft is now available for INR 900/sq ft!! Similar cases are there even in eastern parts of Pune.
Builders can still make flats at 15L even today, what they won't earn is the 300%+ profit which they make.
* Most of the builders had purchased land at throw away rates before the boom period! Areas like wakad & Balewadi had price of sub-INR 100 sq ft for land. Not to forget agri land purchased at even lower rates & later converted to NA.
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Folks,
I have always maintained that anything overpriced must correct to an affordable level. This is called
reversion to the mean!
There is this common belief that land is immune to it. Why? There is no reasonable explanation given to accompany that belief. Its like, my mother always did this, so we continue!!!
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There is this story about preparing turkey for thanksgiving (its a US story, so vegetarians excuse; I too am a veggy
). Following tradition, the daughter of the house snipped off the end of the turkey (considerable snip and so a considerable waste) and put it into the oven. The hubby, married into the family and so not knowing the tradition, asked, "why did you do that and waste so much, especially given the price of turkey"?!
Daughter(wife) said, "thats always been the family tradition and so I follow it"! So, hubby went to mother-in-law and asked, "why do you do that"? She say, "
my mother always did it and so I follow the tradition"!!
Finally, hubby goes to grandmother (in those days they lived a long life) and asks, "why"?
She says, "simple! so that it would fit within the pan which is too small"!!!
Note: While many traditions have a sound reasoning which we may have forgotten, not all of them are sound in their basis!!! We need to question each tradition not to disrespect it, but to see if it has a sound basis!!!
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So, while builders and landowners misused their position and duped buyers into high prices with stories like "land is not being made again", etc, all they did was play to the fears and greed of human nature. Fear that land will run away never to return to a price we can afford. Greed that, if we are the first to book, we can flip it after 6 months for a 50% profit.
When this cooked up demand deflated, the builders who fell for these stories themselves are now left holding high-priced land with no demand. They can't hold it indefinitely as it costs money!!! So, this land has to come to market and has to get sold at lower prices.
> In Baner. a plot which was going for INR 2100/sq ft is now available for INR 900/sq ft!! Similar cases are there even in eastern parts of Pune.
So,
I continue to wait for this inventory to be cleared out with continuously declining prices as weakened land-owners on debt are forced to sell at lower and lower prices. I will buy when it is affordable to me!
I may miss the bus waiting, but at least I will not make the bigger mistake of holding high-priced RE and paying thru my nose to builder and banker so that they can ride in their Mercs!!!
Plus, when I buy the market will have bottomed and prices will be on the rise, so my investments are safe and readily saleable!
cheers