ks2071746

Dear friend,

What you have said above is right.

ks2071746

Sansei

Its been interesting read , specially the Wisemans revisited price/rent ratios and methodical commentary

Once again, would reiterate that unlike stocks, homes r basic need and something has to be added to the equation than just rate of returns!!!

RE might not depreciate as much as feared.

Sansei

a small article for the bloggers.

Why the time is not ripe to buy a home



That the property market has undergone a significant correction is well known. That real estate experts are now talking about prices bottoming out is well known too.
But, contrary to conventional wisdom, experts are of the view that this may not be the right time to invest in residential property. And, their advice is for both first and second-time home buyers.
Consider this: A report from PropEquity, a firm that maintains data on real estate, said that in the first quarter of the current financial year, the Mumbai market saw an average correction of 42.84 per cent compared to the corresponding quarter last year.

According to another report by Centrum Broking on Maharashtra Chamber of Housing Industry's exhibition, prominent developers such as Kalpataru, Lodha, Rustomjee and the Acme Group were quoting prices 20 per cent lower than their card rate six months ago. Godrej Properties had dropped the quoted price of its Mahalaxmi project (Planet Godrej) by 34 per cent.
Prices in other major metros too have seen a significant correction in the past six months, according to the PropEquity report. These include Gurgaon (24 per cent correction), Chennai (13 per cent) and Hyderabad (10 per cent) for the same time period.
If prices are lower, then why investment in realty is not advisable?

"To begin with, the yields of residential properties are low. They are between 3-5 per cent only," says Hitungshu Debnath, executive director, distribution and wealth management, Angel Broking.

If you take a loan from a bank and expect the rent income to help you pay the equated monthly instalment, you will need to rethink the math, he adds.

"The rent income along with property appreciation will not be able to cover even the interest that the investor will pay for the home loan in the first few years. This is called as opportunity cost in real estate. To get good returns, the buyer will need to hold on to the property for a long time, probably till the loan is repaid," says a property expert.
Experts also suggest that property prices are going to remain stable for at least two years, that is, if the correction stops.
"This is based on the supply that will hit the market in the next three years. An estimated 200 million sq ft a year will be available, considering the properties announced," says Pranay Vakil, chairman, Knight Frank (India).
Not all the supply will be lapped up by the buyers immediately. This supply also means that the appreciation in the property value will be slow, he adds.
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Alees

Good survey and you have analysed the situation very well. Thanks for sharing it with us.