mahesh pune

I can think of following reasons for Mumbai rates to fall 50% but pune around 25 to 30 %.
1. Mumbai rates were 6000/- to 10000/- too high to buy for even IT person. Pune rates are 2500/- to 6000/- so still affordable.
2. In Pune buyer is mostly from IT but in mumbai buyers are from business.
3. In mumbai schemes like MHADA helped to fall of prices.
4. In mumbai loading factor is 35% , in Pune it is 25%.
5. In mumbai people are already buying 2 bhk of 700 to 800 sq ft. In Pune builders manage to reduce prices by reducing sq ft area. 2 BHK area reduced in Pune from 1200 to 1000 an dthen to 750. which help to create some demand.

But still their will be more pain for IT in future and so downside in Pune market can happen.

Sansei

The eco survey is out.

The growth rate has decreased.

Some economist say its impractical eco survey:

Consider

- It forcasts 25000 cr from disinvestment every year for next 5 yr.

- It forcast downward unemployment rate of less than 5% after 5 yr

- It wishes reduced subsidy on fertilizer,fuel, sugar etc.

Wish list:

Good monsoon
Good US recovery to boost fallen export.


Its a wish ful thinking.

realacres

Exports are down by 29.2% in last month, low monsoons, US lost over 425,000 jobs last month & US economy to shrink by 3% this year. No recovery in sight for Indian economy for next 1.5-2 years.
No money, no RE. Hence, RE is falling.

wiseman

Folks,

I'm not trying to compare anything to anything. But this is very interesting information and might be used as a cautionary indication for those who believe the false thumbrule that prices cannot go below cost because people will not sell. Well, what if they do not have the financial endurance to hold. Or if the matter is taken out of the builders hands through foreclosure!

Las Vegas is one of the foremost bubble areas. In Las Vegas, there is a huge condo complex called Meridian at Hughes Center located 2 blocks from the Strip. 2BR 2BA condos that sold for $540K in fall 2005 were going for about 120K at the beginning of 2009 (a 78% drop). The units have further droppd to $99K around March/April. Today those 2BR units 2 blocks from the Strip can be had for $75K, or about 15 cents on the peak bubble dollar (an 85% drop). People still think there is another 5% more to go for the absolute bottom to be reached, a 90% drop from 2005 to 2009 in just 4 years!!!!

Of course much of this is to do with both overbuilding, over indebtedness and severe job losses. These may not happen out here in India to that level. But do not count your chickens too early. When we have a worse 2010 than 2009, and a prolonged depressed period completely saps the savings, hope and energy of the common man, there will be many more distressed assets in the market at prices you would think impossible now.

Time will tell.

cheers

badrig

wiseman predicts future vividly and correctly
BEWARE

Sansei

Exports r down consecutively for 8 months in a row!

Predicted by experts to continue same trend till next yr 2/4 qtr.

Exports down to 10 billions, imports down to 15 billions.

fuel imports r also down 60 % - 12 billions : eco activity is slowing down seriuosly.

Bad monsoon will dash rural demand.

Dont expect too much goodies except for BPL families.

Consider : education bill to provide compulsory edu up till 14 yrs

NREG programs further expanded.

Food program to be announced. ( 30 kG Rice)

The HUGE infra planned.

WHERE IS THE MONEY???

If Govt borrows it will increase fiscal deficit above 5.5% ( official estimate ), by the way it will be way above due to unbudgeted expenses + state deficits.

Another factor it will push up interest rate of funds for growth in Pvt sector, as funds dry up.

The bull story is some time away!

Only positive aspect is NRI/ Funds inflows to provide the monies.

realacres

Puravankara to sell 40% stake in Provident Housing:-

]http://economictimes.indiatimes.com/Puravankara-to-sell-40-stake-in-Provident-Housing/videoshow/4737430.cms[/url]

DLF raises Rs 1000 cr through sale of plots:-

]http://economictimes.indiatimes.com/DLF-raises-Rs-1000-cr-through-sale-of-plots/videoshow/4729303.cms[/url]

tsongt

one of my friends whom i visited today gave a great food for thought, and he was completely reverse engineering the equation of RE/rent/prices/salaries.

he lives in a wonderul 3BHK apts paying a rent of 15K per month. He says he has always been paying around 12% of his gross-salary as rent for the last 10 years. And he believes with facts that this equation can never change unless he has a deep cut in his salary, and in that case it means the job market is terribly down -> and that would result in the rents coming down as well. Now this is true for folks paying a 20% as rent as well w.r.t what they earn gross. The % would remain same or come down, will never increase. If the rent increases (which sometimes has no dependancy on inflation), that means your gross earnings will have increased or going to increase soon. He gave me some investment tips and I was amazed to see how practical some folks think about things and hence is very happy in life - never will get affected by any downturn.

And looking at the P/E - price/rent ratios that has been sky rocketing for RE, the bulls theory has to be wrong. Its time to sit back and keep your money in safer places.

realacres

Agree 100% with you, tsongt. Had got an email from friend with these following simple calculations.

Following is one of my simple calculation why buying a house at this rate is financially not so sensible decision:

I will take example of Aundh/Aundh annex/ area.

A – Min price of a 2BHK house in Aundh Annex: 30 lacs

B – Average rent of a 2BHK in same flat in Aundh annex: 9000 Rs per month – 1,08,000 Rs per annum => round it off to 1.2 lacs [rent agent charges]

By simple calculation, even if you invest 30 lacs in a bank FD at 8/8.5% rate, you will get approx 2.5 lacs as interest every year! [You can always diversify your investments to earn at least 12-15% avg return]

Thus, Renting is absolutely a +ve cash flow!

You might want to add your homeloan tax saving as a potential benefit but then on the other hand you will end up paying huge interest to the banks!

So, in practical financial sense, it is a BAD decision to purchase a home at this rates.

Infact, one can rent a 2BHK in Aundh – a much much better area, for 12k per month, grossing approx 1.5L and still save money while leaving in better location!

If you feel that realty prices will appreciate, that means you feel that market will get better than what it is right now. If you so strongly feel market will go up, invest in stock markets! Risk is lesser as you can diversify your investments!

This calculation is only from financial point of view, not considering the emotional point of view of dream (if you call it) of owning a home.

The surge in realty during 2003-2004-2005 was because the rental and EMI difference was tiny. The surge in realty following these yrs was simply due to the momentum created during these years.

1000sqft 2BHK for about 20 lacs will more or less fit in this equations.

realacres

I would like to add some more.

Ownership also comes with these:-

• Property Taxes and Special Assessments
• Home/Hazard Insurance
• Utilities
• Maintenance
• Home Owner Association (HOA) Fee: Doesn't apply to all purchases. It pays for trash removal and maintenance of common grounds if applicable.
• Membership Fee
• Insurance etc

Total Cost of flat = 200 * x; x = monthly rental.
Hence, a INR 10k/month flat value should not exceed INR 20L; else makes better sense to rent than to buy.

Returns/annum on rental at current RE prices is just 3.6%, much less than even bank FD!!