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IREF® - Indian Real Estate Forum > Real Estate in India > Real Estate Gurgaon > What happened in the 2008-09 recession??
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Old July 9 2012, 05:10 PM   #11
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Originally Posted by vireshsangwan View Post
All the properties were sold at lower prices but Mainly the under-construction and far-away places suffered. One example I know is -- Vatika Plots were sold 28000+ in 2007-08 but in 2009 it came down to 15000. At the same time... the quotations I got for plots I was investigating are: 16K in Sector 9, 23K in Sector 23... and trust me these were way below the valuations they were quoting before
Yes, he is right. As you move further away from Delhi - places suffered. Many like Greater Noida never came back home that evening.
But be advised even DELHI suffered similar corrections! Problem is since deals happen behind closed doors, neither buyer nor seller had any reasons to disclose a deal.

I was offered a 100sq yard floor - 1st floor at 70L in Pitampura then and final deal happened at 63L. These were arnd 80L before recession

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Old July 9 2012, 05:27 PM   #12
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basically the problem during recession is that volumes are very very low to determine a stable price levels...only deals on the anvil are from the investors who were over-leveraged or end users who lost jobs etc...but whoever bought during recession in Delhi or Gurgaon must be laughing all the way to the bank now..
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Old July 9 2012, 08:09 PM   #13
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Recessiion,slowdown or course correction are the best thing to happen in any market or product's life cycle. It tests the strength and virility of the stated market to the core.

2008 correction tested the Indian financial market, Real estate market or every other market for the first time in last 10 preceding years of sustained growth or 5 preceding years of bull run. It was very very important.

Economies like US which had seen 3 recession before and were stronger then any of emerging nations, could also not escape the acid test and infact flunked with only one color RED.

I really liked that correction. First of all it taught me many lessons too especially in stock market. But if you see it at macro level it made business to shed the unnecessary weight acquired mindlessly during bull run, they rehashed and reshaped themselves, and got ready for better days ahead.

From the supply side, lots of hoarders got punished. Be it the hoarders of commodity,food supplies, currency or the biggest of it LAND. Over night demand evaporated and value of their net holding halved in no time...

This is where even RE market should have learnt its lesson. But nothing of that sort happened. In fact our govt bailed the sector out. Forced the banks to restructure the loans ...Why ...Because they are the single biggest hoarder of this factor of production.

Result was that it did not correct the RE market like the Stock market. Only those who were over leveraged came out in the market and few deals were done at lower then the market rate but net net even the volumes at low price were low.

Problem of recession is that it gives you a comfort of taking a decision at leisure and hence people more seldom loose the opportunity as they fail to take the decision due to insecurity of future or for waiting for the prices to fall further.

You can correlate this with the stock market. The volumes of all the stock markets are at the max when markets peak out and are at rock bottom when market bottom out. Hence the real price is the price which is taken along with the volumes. What it means is that most of us end up buying things at the higher prices and hence do not sell when the prices are low as the holding power of most of the investors in RE is much bigger then what we think.

Second point to note is that in any asset class its only on hindsight most of us clearly say whether we have come out of top or bottom. No one say when you are in middle of it.
So in 2008-9 when many deals were available at low prices 99% of us left them thinking it will go further down. Today 100% of us can say in Hindsight that 2008-9 was the time of recession. But can any one today say with authority that tomorrow we will again see another lows of RE.... I dont think its possible. May be the same prices that look ridiculously high right now look incredible affordable 2year down the line. But you can judge it against a backdrop of past performance.

So how to go about it. Simple. Buy what you can afford now and hold for another 5 years without straining your finances. Buy only for end use not for speculation. Even if the prices come down tomorrow by 20% you wont sell and even if it goes up by 50% you wont sell. Find me one soul on IREF who sold his house (bought for end use) during recession of 2008 in fear of further slide or a soul who is ready to sell the house today for profit bought for end use yesterday...

Endless learning to share but the most imp being ->>>>>>>>>>>>>>>>

Always remember to keep your TEMPTATIONS under control as in RE yeah Dil always Mangey More,.
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Old July 9 2012, 08:22 PM   #14
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One takeaway I've had in RE is to always invest in properties with some financial backing, so that you can hold a property for long even if the prices fall in the short term. Any other takeaways / learnings from others, especially on how to save your self from distress sale when you've invested just the margin money without financial backing?
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Old July 9 2012, 08:27 PM   #15
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In fact, another question -- were the distress sales in 2008-09 caused just because people started panicking and wanted to hold cash, or were builders structurally making people sell their properties by triggering certain events (e.g., raising demand payments, which caused investors to sell at distress prices since they didn't have money to make the installment). Am asking since I've heard that most builders stopped construction during that period, so anyways instalment demands wouldn't have got raised, right?
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Old July 9 2012, 09:06 PM   #16
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Originally Posted by rushilarora View Post
So how to go about it. Simple. Buy what you can afford now and hold for another 5 years without straining your finances. Buy only for end use not for speculation. Even if the prices come down tomorrow by 20% you wont sell and even if it goes up by 50% you wont sell. Find me one soul on IREF who sold his house (bought for end use) during recession of 2008 in fear of further slide or a soul who is ready to sell the house today for profit bought for end use yesterday...
Thats a good advice, but unfortunately current real estate prices is unaffordable to huge majority of population, including but not limited to IT sector junta.
So they resort to taking huge loans, when they are not even sure , how long their job would last.

2008 recession should have taught at least one lesson to those (specially in outsourcing based jobs) who think buying house on 80% loan makes them worthy house owners.

I could buy a house even with today's inflated prices if I take joint loan with better half, but is it worth it?
Answer is NO because that would mean we both commit ourself to slavery of banks for rest of our best years.

I have seen female employees not taking extended unpaid leaves after child birth as they have Home Loan EMI's to pay. This is not a good situation to be in.
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Old July 9 2012, 10:51 PM   #17
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I agree whole hearted with you. No point in becoming a slave. The level of emi should be comfortable, and should be easily payable in one person's salary.

Once you take a loan you realize how much freedom you have lost. Forget about taking a month's unpaid leave to go trekking or traveling

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Originally Posted by AJAY_GGN View Post

2008 recession should have taught at least one lesson to those (specially in outsourcing based jobs) who think buying house on 80% loan makes them worthy house owners.

I could buy a house even with today's inflated prices if I take joint loan with better half, but is it worth it?
Answer is NO because that would mean we both commit ourself to slavery of banks for rest of our best years.

I have seen female employees not taking extended unpaid leaves after child birth as they have Home Loan EMI's to pay. This is not a good situation to be in.
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Old July 9 2012, 11:30 PM   #18
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Originally Posted by Amitau View Post
I agree whole hearted with you. No point in becoming a slave. The level of emi should be comfortable, and should be easily payable in one person's salary.

Once you take a loan you realize how much freedom you have lost. Forget about taking a month's unpaid leave to go trekking or traveling
Boss, we have Learnt our lesson. India rose because of low cost base followed by international salaries. Now, we have international cost base (schooling, living, inflation, medical costs) supported by low cost salaries.... A laughable situation. The folks who compare indian RE prices with developed world like US hould also compare our cost structure with theirs.
With no medical back up, no social security, no infrastructure, no white economy aka taxes and no high paying jobs or consumer protection laws or judiciary..... Its suicidal to gift away your hard earned money to these buggers. Especially when salary hikes are barely beating inflation and cost of raising family,kids going up manifold.. writing is on the wall.. Just let this extrapolate for another 5-10 years and we will all see the true accounting behind the costs and prices.
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Old July 10 2012, 12:27 PM   #19
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totally agree with you Matrix bhai...infact inflation index published by government is hardly an indicator of actual inflationary situation we guys face in Metros...if you see the items on govt list (on the basis of which they calculate inflation) even after revision you would probably laugh ..another point is that govt mostly looks at wholesale prices .. while the inflation is more pronounced at retailers end.. look at house rents...school/college fees..fuel prices, fruits/vegetables etc etc...inflation is much more than 8% currently being portrayed by govt...if you keep a simple record of prices you pay..the inflation we are facing is actually in the range of 20%



Quote:
Originally Posted by matrix_55 View Post
Boss, we have Learnt our lesson. India rose because of low cost base followed by international salaries. Now, we have international cost base (schooling, living, inflation, medical costs) supported by low cost salaries.... A laughable situation. The folks who compare indian RE prices with developed world like US hould also compare our cost structure with theirs.
With no medical back up, no social security, no infrastructure, no white economy aka taxes and no high paying jobs or consumer protection laws or judiciary..... Its suicidal to gift away your hard earned money to these buggers. Especially when salary hikes are barely beating inflation and cost of raising family,kids going up manifold.. writing is on the wall.. Just let this extrapolate for another 5-10 years and we will all see the true accounting behind the costs and prices.
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Old July 10 2012, 02:32 PM   #20
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Originally Posted by aabansal View Post
totally agree with you Matrix bhai...infact inflation index published by government is hardly an indicator of actual inflationary situation we guys face in Metros...if you see the items on govt list (on the basis of which they calculate inflation) even after revision you would probably laugh ..another point is that govt mostly looks at wholesale prices .. while the inflation is more pronounced at retailers end.. look at house rents...school/college fees..fuel prices, fruits/vegetables etc etc...inflation is much more than 8% currently being portrayed by govt...if you keep a simple record of prices you pay..the inflation we are facing is actually in the range of 20%
True... mine is a family of 5 and am spending 55K per month to have a middle class life with a Maruti Alto. Luckily, no one has medical issues and my kiddo is just 1, so no school, tuition fees yet. But what about the days when my parents grow much older and kiddo starts going to school... then tuitions and then days when they will ask for their personal expenses and then will ask for personal vehicle (petrol, insurance)... GOD knows how will a middle class person survive.

And its not only the in METROs... for smaller cities as well the situation is not good.
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