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The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

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The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

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  • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

    https://www.livemint.com/news/india/...855938175.html
    Pandemic leaves Bengaluru's suburbs eerily empty as IT crowd moves away

    Only time will tell how this will pan out. Vaccine is here and though it might take some time for people in India to actually get it.. but if the fear is gone.. behavior is different.. Time will only tell

    Comment


    • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

      Originally posted by Sharpj View Post
      https://www.livemint.com/news/india/...855938175.html
      Pandemic leaves Bengaluru's suburbs eerily empty as IT crowd moves away


      Only time will tell how this will pan out. Vaccine is here and though it might take some time for people in India to actually get it.. but if the fear is gone.. behavior is different.. Time will only tell
      Here in Pune also many Flats/PG's are now vacant, and many eateries/shops closed.
      IT offices will not open for coming months till all are vaccinated, as with WFH no impact on work or productivity was noticed. This will become the new normal with people working from their native cities.

      Comment


      • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

        Situation will improve within next 3 to 4 months, discounts will go away especially in good locations.
        Remember it is a all time low interest rate that led to a very fast capital value rise in US. The home sales are at 10 year high amongst the pandemic. It is just that people see the prices in India than the rates. Today I am able to afford 30lakh more than last year due to lower interest rate primarily.

        Once the pandemic is slowly getting over, people will come back to Bangalore and live will start getting back to full normalcy, that is when the big bull market will start again in real estate, especially in good locations with lower inventory.

        Comment


        • pratik1762006
          pratik1762006 commented
          Editing a comment
          Please get back to basics of real estate - location. Way to choose a good location is checking the location for good roads, well laid footpath, an active citizen group, good connectivity to workspaces, malls, hospitals, schools, etc. The more number of items you can check out - remember your appreciation will be higher even if you are buying for high price.

          Going and buying in bad location and then expecting good appreciation does not work, anymore, in Bangalore.

      • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

        As the old RE bulls have retired (hurt), there seems to be new set of RE bulls appearing on the horizon. But at the sake of repeating myself , here is some reality about realty ( Bengaluru in particular and India in general ) in the post Covid era.

        RE as investment is finished. Buy RE only if you are an end user and plan to live in the house/apartment for the next 10 years, at least. If you sell anytime in the middle or even after 10 years, there is no guarantee of even Return OF investment, forget about Return ON investment.

        Post Covid, and the Work from home concept, rents have crashed around 30% in both residential and commercial spaces. Techies are working from their homes in villages and smaller towns in other states. PGs have been hit by 80-90% losses and most have exited the business because its just unsustainable. Commercial offices and IT parks are tottering with losses due to exit of high-profile companies. While things may go back to normal, the efficiencies and lessons learnt will ensure that companies use WFH as a tool for cutting costs in the long term.

        To step back and understand RE dynamics post Covid- the return on RE (land or apartments) has been negative for past 10 years , after adjusting for inflation and other costs, considering the upheavals in the market with Demonetization, GST, RERA and now Covid. Apartments are not selling and people are booking losses on their investments
        If you are planning to buy from leading builders for own use, the range of your purchase should be Rs 5000-6000 per sqft for ready to move in apartments. If the project is upcoming or just being launched, forget about putting money. And if the marketing guy tells you, your investment will go up x% in y years, then ask him to give it to in writing with a buyback from the same builder at x% increase after y years.

        Most Tier 2 and Tier 3 builders are bankrupt and the losses are huge. And this was even before the pandemic hit. Post Covid, the full impact is still to be assessed since the moratorium has just been lifted couple of months back and the Supreme court is yet to decide on NPAs. Post clarity from SC, expect a flood of NPAs and more builders to bleed.

        Remember if a Purvankara or Prestige is selling their assets to Godrej or Blackstone, that means things are bleak. If they who are in RE full time are not able to sustain, the fate of RE investors who are part time will be worse.

        If you are buying from resellers, negotiate upto 40% on the quoted price. And guidance value has no meaning in the current market scenario (read my previous posts on guidance value). Guidance value should be taken as guidance only for the stamp duty which needs to be paid to the Government. It has no connection with the market rate today. Remember, every rupee you save in purchase cost, you save another additional rupee in interest and other costs over your loan tenure.

        As regards the job scenario, the situation is quite dicey. Although IT companies have not officially announced layoffs, there are under the radar retrenchments happening especially in middle and higher management level. The target category is age > 40 -45 years and salary > 25 lakhs per annum. In some cases, entire business unit employees have been laid off which means everyone in the unit is impacted, no matter what age and salary.

        So, if you still have a home loan running, hunker down and try to prepay as much as possible and reduce your debt and liabilities. If at the age of 40, you are carrying a home loan with a remaining tenure of 10-15 years, you are asking for big trouble.

        Finally on the RE bulls theory of low interest rates raising the tide of sales of homes, just remember the 6.75% quoted by the banks are only for the highest credit rating individuals (CIBIL above 800). Hardly 10% of the eligible population has that kind of credit ratings. So an average home loan will still be around 8-8.5%. This is not 2007 when everyone and his uncle was given loans at 7% and led to massive NPAs post 2009. Today banks have massive data around individuals and interest rates are tweaked to an individual level. And banks today ask for 20-25% margin amount from a borrower, unlike the old days when 90% (or even 100%) funding was possible.

        So, the bottom line is its not just interest rates but also ticket sizes which will determine the future of RE. The market cannot command the fancy rates when things are bad globally. So be very careful, trust no one and verify everything before you commit for a big-ticket purchase.

        Comment


        • amirkhan235
          amirkhan235 commented
          Editing a comment
          Looking for a plot of land in a rajanukunte - builder asked for 3100psft told him to get lost - now he is quoting 2400psft - I am still trying to get it down to 1850 psft - would you say this is a fair price? It’s only for end use but I’m not spending my hard earned money for the builders fancy justification for clubhouse and some grass and trees.

        • Useless
          Useless commented
          Editing a comment
          amirkhan235, in a layout 300m inside Rajankunte circle used to quote 1200 /sqft and the ones next to the main road 1800/sqft 8 years back. Somewhere in 2009-10 used to quote 700/sqft. Now of course the road has widened and Covid hit as well. Price depends on the location from main road and whether the neighbourhood is close to the old village or newer layout and your layout is not compounded essentially rendering a dead end whose effect will be felt later on. I have noticed people working in Manyata are generally buying/renting apartments around there. And Manyata was expanding big time before Covid.

          1850/Sqft is a good price but don't expect to flip it for profit easily. There is a metro planned till there so long terms returns should be good.

          My Experience: In the middle of nowhere, 3km inside airport road a builder quoted 2900 for plot in 2019. My simple question to him was whether it would double to 6k/sqft in 4 years because I can double my money in other assets safely. Later, he started using FOMO technique and told that only one plot is available and because buyer's loan got cancelled. And he is willing to reduce to 2600/sqft if I transfer 25k to him in 1hour. During May-2020, a nearby builder called and quoted 2400/sqft. I asked him the same question and he reduced to 2100 on the spot. He told he can negotiate if I visit his office.

          Provident Welworth city in Doddaballapur used to quote 44lakhs + floor raise charges for a 3BHK apartment in 2013. Last year I heard the builder is pleading to sell a 3BHK for 38Lakhs
          Last edited 4 days ago.

      • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

        Originally posted by pratik1762006 View Post
        Situation will improve within next 3 to 4 months, discounts will go away especially in good locations.
        Remember it is a all time low interest rate that led to a very fast capital value rise in US. The home sales are at 10 year high amongst the pandemic. It is just that people see the prices in India than the rates. Today I am able to afford 30lakh more than last year due to lower interest rate primarily.

        Once the pandemic is slowly getting over, people will come back to Bangalore and live will start getting back to full normalcy, that is when the big bull market will start again in real estate, especially in good locations with lower inventory.
        I did some math, the interest rate was around 9% last year and 7% this year. So, to afford 30 lakhs more for the same emi because of interest rate reduction entails a loan of 2 Crore.

        2 Crore 9% for 20 years : 1.8 Lakhs emi/month
        2.3 Crore 7% for 20 years : 1.78 Lakhs emi/month

        Considering that bank will let your emi be only 50% of the take home pay.The take home pay must be 3.6 Lakhs/ month or 5 Lakhs before taxes or a pay of 60Lakhs package per year. I wonder why anyone who earns that kind of money would get locked into a single asset in such times.

        Comment


        • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

          Originally posted by Somashekar View Post
          As the old RE bulls have retired (hurt), there seems to be new set of RE bulls appearing on the horizon. But at the sake of repeating myself , here is some reality about realty ( Bengaluru in particular and India in general ) in the post Covid era.

          RE as investment is finished. Buy RE only if you are an end user and plan to live in the house/apartment for the next 10 years, at least. If you sell anytime in the middle or even after 10 years, there is no guarantee of even Return OF investment, forget about Return ON investment.

          Post Covid, and the Work from home concept, rents have crashed around 30% in both residential and commercial spaces. Techies are working from their homes in villages and smaller towns in other states. PGs have been hit by 80-90% losses and most have exited the business because its just unsustainable. Commercial offices and IT parks are tottering with losses due to exit of high-profile companies. While things may go back to normal, the efficiencies and lessons learnt will ensure that companies use WFH as a tool for cutting costs in the long term.
          Bank FD rates are around 5 percent today and paying taxes on interest takes it to 4%. Rents were going up before Covid because prices were not going up. With a little bit of research should be able to find properties fetching over 3% rent and in a two income household can claim tax deductions and get the returns to over 4%. Sure the prices can stagnate or go lower. As long as one can have reasonable job security, this is probably the time to review buying a home. However, the era of flipping is over.

          I don't believe rents have not gone down uniformly. Some people have moved to periphery of Bangalore from a shit hole near their workplace for a bigger house to WFH. The rents have not gone down in well planned peripheral layouts which gives good quality of living. Hopefully, Covid lesson stops people from building 4-5 floors on a 20x30 piece of land just because a IT company is near by and there is demand for rent

          Comment


          • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

            Originally posted by adithya76 View Post
            Useless
            Thats very useful. Thanks Any idea how is the situation in CBD area/old Bangalore area for independent houses?. To my surprise, the sellers are asking way higher than the prevailing market price. This is at a time when people are talking about discount, large number of renters vacating Bangalore etc! !. I was not expecting any crash/discount and was ok to pay the higher range of market price. But 15-10% above the market value looks a bit too much. ( You might wonder how I know the market price. Its based on info from recent transactions and input from people who live there)
            Now the confusing part is that, they claim some buyers at that price. While I agree that, it could be a pressure tactics, in some cases we cant rule it out. There will always be buyers.
            The argument could be, there are not many options in this area.
            Some times I wonder if its worth paying that much ( even if one can afford it) considering work from home or hybrid work from home could be the new normal. ( in some sectors). Also most of these houses are not livable. We need to demolish and build. That's another headache.
            I will tell you a small secret adithya76 , stop looking for distress sales. No is going to sell anything for less. Especially in core city.

            If you are thinking Corona or WFH things are going to reduce prices, or even slow down demand you are going to be in for a surprise.

            You know people buy more stocks when market is down, right? Turns out that is how it works in nearly any asset class. Gold prices down? suddenly you see middle class lining up in front of jewelry shops. Small opportunity opens up for buying property? People start thinking up-to their grand children's generation, and try to work out how good life will be for them.

            This is not bad or something to criticize. They just want a chance to get ahead in life. Where ever there's little chance people go for it. Atleast they are not going into corruption or anything.

            By the way, most companies will open up soon, Some have opened already. Productivity has been falling without collaborations for weeks now. If people don't want to come back, enough freshers are in supply to take their place.

            The way I see sometime around mid next year, you are likely to see a surge in demand again. This is the time when you will again see renewed surge in posts on forums like these accusing of people being greedy in having more than 1 property. Calling for rent control etc.

            Comment


            • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

              Originally posted by Useless View Post

              Bank FD rates are around 5 percent today and paying taxes on interest takes it to 4%. Rents were going up before Covid because prices were not going up. With a little bit of research should be able to find properties fetching over 3% rent and in a two income household can claim tax deductions and get the returns to over 4%. Sure the prices can stagnate or go lower. As long as one can have reasonable job security, this is probably the time to review buying a home. However, the era of flipping is over.

              I don't believe rents have not gone down uniformly. Some people have moved to periphery of Bangalore from a shit hole near their workplace for a bigger house to WFH. The rents have not gone down in well planned peripheral layouts which gives good quality of living. Hopefully, Covid lesson stops people from building 4-5 floors on a 20x30 piece of land just because a IT company is near by and there is demand for rent
              Most PG's are empty. But families haven't gone back to native for obvious reasons. You don't pack up and leave for Bihar for months just because they decided to close down for 2 months. You have kids who have schools close by. Couples with kids in high school don't even an option of thinking going back.

              Several people have worked whole life to come out of small towns to get economic opportunity here in cities. They are not going back for these reasons. Eventually the only people who did a temporary relocation are those freshers who vacated PG, knowing they can come back to it. They didn't have furniture to relocate, nor kids to pull out of school.

              So nothing changes really on the rent situation. Even in case of homes, I don't seen any change in prices any where in the core city.

              By the way I run into traffic jams near Manyata Tech Park routinely these days. Which tells me to great degree things have come back to normal.

              Comment


              • Re : The Impact of IT Slowdown on Real Estate Markets in Bengaluru, Hyderabad & Pune

                Originally posted by Useless View Post

                I did some math, the interest rate was around 9% last year and 7% this year. So, to afford 30 lakhs more for the same emi because of interest rate reduction entails a loan of 2 Crore.

                2 Crore 9% for 20 years : 1.8 Lakhs emi/month
                2.3 Crore 7% for 20 years : 1.78 Lakhs emi/month

                Considering that bank will let your emi be only 50% of the take home pay.The take home pay must be 3.6 Lakhs/ month or 5 Lakhs before taxes or a pay of 60Lakhs package per year. I wonder why anyone who earns that kind of money would get locked into a single asset in such times.
                This kind of math is for people who look at buying a home like getting their wedding dress stitched. That is start looking for a home 1 months before you want it.

                I started years back, got the land for dirt cheap. On a loan that is long settled. I even got the home built on 50% saving, and raised a small loan, which also will be settled.

                Start early. You make it, practice. Its the same advice every where. Want to get into an IIT? start early, practice, work hard. Want a healthy body? Start early, exercise, training. Don't start at age 45-50 and expect to have a six packs in weeks.

                Same with home, start early. Start in 20s. Scout, find opportunities, take small loans and risks. Buy frequently.

                Its such a simple and obvious thing.

                Comment

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