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saurabh227 · 27-04-10

I am not a commerce graduate but that does not limit my understanding of the real estate market and its inherent trends. I see small time builders quoting 7000 - 9500/- bucks per sq. feet in mumbai suburbs.

There are many reasons for the price increase we are witnessing. I have jotted a few below.

1. interest rates are low...(1990 rates used to be 16-18%) now they are quoting at 8.5-10% which creates enough liquidity in the market for transactions to happen. Any country which has a liquid cash market prevalent for longer periods witnesses higher inflation. Hmm....food, clothing, shelter are expensive by all means when compared to their 2003 value.

2. Infra projects are being executed and completed on time e.g. metro rail, mono rail, international airport,airport expasnion, proposed worli haji ali link road, etc. Property rates surrounding these areas will jump by 10-15% (as happened in the case of Banda Worli Sea Link)...which will have a ripple effect through out the suburbs.

3. Cost of construction has gone up in April'10 budget with excise duties imposed on most of the construction materials. Is builder going to pay for this increase through his pocket?

4. 3.5% service tax on new construction will put resale properties in demand. These resale owners in turn charge higher rates since they also want to invest the gains in new properties (to avoid capital gains tax) and want to offset the 3.5% service tax cost as well. (India is truly a talented Financial Planners Regime)

5. limited space in mumbai means...demand > supply. A lot of people argue that we have an over supply of residential products..true ..supply is greater than demand...if u take the demand scope to be only mumbai...but friends...everyone is after mumbai....demand is from Gulf(NRI sending huge remittances back home)...Canada(lots of sardarjis have invested in Hiranandani powai area)...Foreign funds (mostly buying real estate in mumbai for launching their international products for a huge consumer base like india as these people always start investments in Financial capitals across the globe..e.g Hong Kong..singapore..dubai...new york..london...)..in fact the demand for property in mumbai is also driven by other domestic location in india...mainly gujarat and punjab...so tht turns around the equation demand > supply. A visit to oberoi mall, inorbit mall and the new palladium mall (Phoenix mills) will confirm this trend. International products have found a buyer in Indian consumer and for launching their products or to create a future exposure to this market, many corporate houses have bought sizable space in mumbai. and this also applies to MNCs like accenture, IBM, etc who want to establish a firm footing here
6. foreign funds are entering india thru various routes ...

7. Disposable income with pay packets ranging from 15Lacs to 25 lacs leaves enough cash in hand for second property. and enough room to pay monthly maintenance charges of 10k. So 10K maintenance monthly when u earn 1 lakh monthly is hardly 10% outgo in maintenance

People tell that all this party is going bust soon and most of them comment"when america sneezes, India catches cold" I wud just correct it..."when america sneezes, world catches cold..but not india"

We are very insulated economy bcoz of leftist policies (thanks to their conservative nature)...but as we march into next decade...we will see a lot of interaction between US and indian economy...by way of trade relations..and then 20 yrs down the line ..when america sneezes ..india will catch cold....tht will happen...coz its american policy to weave all countries in this fabric of globalization and float its currency ($) in the world market which it has indefinite printing control....but as trade relations improve so will std of living and rate of inflation...if u track economic indicators for last 6 years then u will realise tht we are already in the express development mode....tht is why everything from food clothing and travel cost has increased....how can real estate fall behind...i can on extrapolate tht this trend will continue.

27-04-10	#16
saurabh227 New Member Join Date: Apr 2010 Posts: 30 Thanks: 0 Thanked 0 Times in 0 Posts	I am not a commerce graduate but that does not limit my understanding of the real estate market and its inherent trends. I see small time builders quoting 7000 - 9500/- bucks per sq. feet in mumbai suburbs. There are many reasons for the price increase we are witnessing. I have jotted a few below. 1. interest rates are low...(1990 rates used to be 16-18%) now they are quoting at 8.5-10% which creates enough liquidity in the market for transactions to happen. Any country which has a liquid cash market prevalent for longer periods witnesses higher inflation. Hmm....food, clothing, shelter are expensive by all means when compared to their 2003 value. 2. Infra projects are being executed and completed on time e.g. metro rail, mono rail, international airport,airport expasnion, proposed worli haji ali link road, etc. Property rates surrounding these areas will jump by 10-15% (as happened in the case of Banda Worli Sea Link)...which will have a ripple effect through out the suburbs. 3. Cost of construction has gone up in April'10 budget with excise duties imposed on most of the construction materials. Is builder going to pay for this increase through his pocket? 4. 3.5% service tax on new construction will put resale properties in demand. These resale owners in turn charge higher rates since they also want to invest the gains in new properties (to avoid capital gains tax) and want to offset the 3.5% service tax cost as well. (India is truly a talented Financial Planners Regime) 5. limited space in mumbai means...demand > supply. A lot of people argue that we have an over supply of residential products..true ..supply is greater than demand...if u take the demand scope to be only mumbai...but friends...everyone is after mumbai....demand is from Gulf(NRI sending huge remittances back home)...Canada(lots of sardarjis have invested in Hiranandani powai area)...Foreign funds (mostly buying real estate in mumbai for launching their international products for a huge consumer base like india as these people always start investments in Financial capitals across the globe..e.g Hong Kong..singapore..dubai...new york..london...)..in fact the demand for property in mumbai is also driven by other domestic location in india...mainly gujarat and punjab...so tht turns around the equation demand > supply. A visit to oberoi mall, inorbit mall and the new palladium mall (Phoenix mills) will confirm this trend. International products have found a buyer in Indian consumer and for launching their products or to create a future exposure to this market, many corporate houses have bought sizable space in mumbai. and this also applies to MNCs like accenture, IBM, etc who want to establish a firm footing here 6. foreign funds are entering india thru various routes ... 7. Disposable income with pay packets ranging from 15Lacs to 25 lacs leaves enough cash in hand for second property. and enough room to pay monthly maintenance charges of 10k. So 10K maintenance monthly when u earn 1 lakh monthly is hardly 10% outgo in maintenance People tell that all this party is going bust soon and most of them comment"when america sneezes, India catches cold" I wud just correct it..."when america sneezes, world catches cold..but not india" We are very insulated economy bcoz of leftist policies (thanks to their conservative nature)...but as we march into next decade...we will see a lot of interaction between US and indian economy...by way of trade relations..and then 20 yrs down the line ..when america sneezes ..india will catch cold....tht will happen...coz its american policy to weave all countries in this fabric of globalization and float its currency ($) in the world market which it has indefinite printing control....but as trade relations improve so will std of living and rate of inflation...if u track economic indicators for last 6 years then u will realise tht we are already in the express development mode....tht is why everything from food clothing and travel cost has increased....how can real estate fall behind...i can on extrapolate tht this trend will continue.