Beware of the real estate bubble - Page 5 - Indian Real Estate Forum

wadia · 12-04-10

Quote:

Originally Posted by hsc

There's no question that buying a property is a good decision. However
the timing is equally important. Before the housing bust in the US, I always thought that real estate will atleast give you "inflation" returns.

However thats not true any more. The paradigm has shifted, at least in the US and i see a lot of parallels between the US market and the Indian real-estate market right now. The Indian market is in a state of euphoria right now, like 2005-2007 in the US. I can tell you what might happen. People will buy at these prices, they will take loans, overstrecth themselves. and "When" the bubble bursts, quite a few houses will be under water. ie the mortgage owed will be more than the house is worth.

10% of the mortgages in the US are under water at this time. It might not be that bad in India, because the % of people taking a bank loan is relatively smaller, but who ever buys at the peak will be hurt. Just my opinion.

--hsc

I think the bank loan criteria in India is much stricter than it was/is in US. The whole credit history system in US was flawed.
If you ever applied for loan with SBI or ICICI you would notice the criteria they apply. One of the guys who was able to secure 75L with citi in America qualified for just 30 lakhs with SBI.
The Indian regulator (RBI) is doing a great job

Sharpj · 12-04-10

Yeah I think the criterias in India are much more severe.. but as a buyer you need to be careful and should not over leverage.. and hope that you stay employable for 20 years.. with a decent hike as otherwise.. with a substantial portion of the salary going to pay off the EMI, if you lose the job suddenly.. you will have big problems as your saving is pretty meagre.

nitin_shams · 12-04-10

Quote:

Originally Posted by raju888

Mumbai prices will crash like a pack of cards. Just wait

And do you mind giving the rationale behind that please?

Sharpj · 12-04-10

We all wish they would crash.. but I guess it is unlikely that it would ... unless there is some extraordinary event and all the NRI's are selling at an distress to take the money out.. but if something like that happens.. real estate prices will not be our only concern..
I am happy if they are stablized at the 2009 levels.. or better the 2005 levels.. but the reality is it is unlikely to happen ..the 2005 levels..

wadia · 12-04-10

Quote:

Originally Posted by Sharpj

We all wish they would crash.. but I guess it is unlikely that it would ... unless there is some extraordinary event and all the NRI's are selling at an distress to take the money out.. but if something like that happens.. real estate prices will not be our only concern..
I am happy if they are stablized at the 2009 levels.. or better the 2005 levels.. but the reality is it is unlikely to happen ..the 2005 levels..

Great analysis Sharpj. It is more likely that RE prices crash when everything crashes. And do we want everything to crash again

shivkumar2 · 12-04-10

I hope it does but I seriously doubt it. Recently a flat in Worli was sold at Rs 97,000 psf which is more expensive than Manhattan. Last week ICICI sold their residential flats for Rs 61 cr to Videocon. Mumbai is a crazy place where big delas are happening unlite other metro..Unless another meltdown happens worldwide I seriously doubt if real estate prices will correct..

wadia · 12-04-10

The worli deal was a special case. If you are the wife of Yes Bank Founder and you want to buy a flat in Mumbai where will you buy?

You will live in a posh scoiety (one which has Ketan Parikh & Scindias) and if it costs an odd 15-20 crores extra, you don't care.

Tomorrow when Ambani finishes hi building at the cost of 1 Billion Dollar, will you compare it with the price of Manhattan? Special cases deserve special analysis.

Sharpj · 13-04-10

Yes.. these deals at Napeansea road, NCPA and worli are not indicative and are always splashed around becuase it is news worthy, but are not indicative of any market trend.
The land price is high and it is worrying that government still has some archaic rules that prevents from supply to be released.. We had the urban celing act,, FSI, the CRZ, release of mill lands.. and ofcourse the SRA .. I think if they are honest and do something about these... there will be plenty of supply of land.. we can have so much land released in Dharavi, Bandra E.. list is countless..
There is so much of corruption and no proper inplementation that nothing ever gets done....
Also people have got greedy.. if you are in Borivali and living in a old apartment.. everyone is excited that the builder is charging 6000 psf and if anyone is selling will ask for same amount or 5800 psf.. why would they sell at 2005 rate of 1800 psf at Borivali Kandivili.. nobody would..

12-04-10	#47
wadia Senior Member Join Date: Apr 2010 Posts: 637 My Mood: Thanks: 0 Thanked 5 Times in 5 Posts	The worli deal was a special case. If you are the wife of Yes Bank Founder and you want to buy a flat in Mumbai where will you buy? You will live in a posh scoiety (one which has Ketan Parikh & Scindias) and if it costs an odd 15-20 crores extra, you don't care. Tomorrow when Ambani finishes hi building at the cost of 1 Billion Dollar, will you compare it with the price of Manhattan? Special cases deserve special analysis. Last edited by wadia; 12-04-10 at 06:28 PM.

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12-04-10	#42
Sharpj Senior Member Join Date: Mar 2010 Posts: 765 My Mood: Thanks: 7 Thanked 15 Times in 11 Posts	Yeah I think the criterias in India are much more severe.. but as a buyer you need to be careful and should not over leverage.. and hope that you stay employable for 20 years.. with a decent hike as otherwise.. with a substantial portion of the salary going to pay off the EMI, if you lose the job suddenly.. you will have big problems as your saving is pretty meagre.

12-04-10	#46
shivkumar2 Member Join Date: Sep 2009 Posts: 67 My Mood: Thanks: 0 Thanked 0 Times in 0 Posts	I hope it does but I seriously doubt it. Recently a flat in Worli was sold at Rs 97,000 psf which is more expensive than Manhattan. Last week ICICI sold their residential flats for Rs 61 cr to Videocon. Mumbai is a crazy place where big delas are happening unlite other metro..Unless another meltdown happens worldwide I seriously doubt if real estate prices will correct..

13-04-10	#48
Sharpj Senior Member Join Date: Mar 2010 Posts: 765 My Mood: Thanks: 7 Thanked 15 Times in 11 Posts	Yes.. these deals at Napeansea road, NCPA and worli are not indicative and are always splashed around becuase it is news worthy, but are not indicative of any market trend. The land price is high and it is worrying that government still has some archaic rules that prevents from supply to be released.. We had the urban celing act,, FSI, the CRZ, release of mill lands.. and ofcourse the SRA .. I think if they are honest and do something about these... there will be plenty of supply of land.. we can have so much land released in Dharavi, Bandra E.. list is countless.. There is so much of corruption and no proper inplementation that nothing ever gets done.... Also people have got greedy.. if you are in Borivali and living in a old apartment.. everyone is excited that the builder is charging 6000 psf and if anyone is selling will ask for same amount or 5800 psf.. why would they sell at 2005 rate of 1800 psf at Borivali Kandivili.. nobody would..