Quote:
Originally Posted by unlikely
As prads_in has pointed out there are several factors which pushed property prices up.Builders hiking up apartment prices for no apparent reason but greed was another feature sending land prices shooting up.
Recently , in a meeting with the FM, RE companies made the curious statement that unless land prices come down, it would be unprofitable
to reduce prices.
Now my question to forum members is this. Is the reverse true ?
If there is a fall in apartment prices,say 30-50% which seems imminent,would the land prices follow suit ?
I would like to invite forum members' valuable comments on this.
Thanks in advance.
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Dear Unlikely,
One of my other hobbies is equity analysis to find hidden gems in the stock market. While doing this recently, I figured that the RE sector is making profits even higher than the IT and other sectors. If you look at the reserves they have built up (many through usurious route of exorbitant premia on IPO), they have looted the public - but the public too is to blame falling for this trick due to their own greed
.
But to answer you question, this morning a Goldman analyst spent a lot of time answering questions about RE. Incidentally he was of the opinion that there is likely to be a 30% fall in areas that had had big jumps.
He was taking the 1996-98 crash as the basis (since that was the only boom-crash cycle we have had in India in the recent past). I remember, land which had gone from 2-5 lakhs per acre before the boom rose to 60 lakhs in Whitefield. From there it fell to between 8 - 10 lakhs by end 98. Then it took till late 2004 for prices to return. I had mentioned this exact same thing some time back in a post. He too said the same thing.
So, who says land value does not fall! Of course it does
when it goes too high. In the long term it gradually rises but after booms, it falls quite a bit.
Land prices have the same properties as Tomato prices. Demand and supply (of course there are other parametric differences, but you get the point).
So, all this stuff by builders is either disingenuous (that they are being dumb not knowing things) or is being fed to you for their own ulterior reasons (so that you can believe this and fall for their high prices). Which one of this do you think is happening?
cheers