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Are Real Estate Prices Going To Fall 40% by Mid 2007?

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Are Real Estate Prices Going To Fall 40% by Mid 2007?

Last updated: February 21 2009
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  • #51

    #51

    Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

    GOVT is only supporting the corporates not the actual Buyer. Lets assume they are giving the tax benefit to the Builder. Then they are earning more. Your price marely differ anything. Inflation came down still the price of Veg/Rice is on high. I think GOVT should look into the pocket of Common man instead of Seller/Corporates.
    Either land or AIR and FOOD. Choice is yours.

    Comment

    • #52

      #52

      Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

      Originally posted by psvjaya View Post
      Anyone think that the prices of flats will fall 40% from the mid 2007 prices ?
      Not sure about 40%. But definitely there is a fall by minimum of 15 to 20%
      in all the categories(Plot,Flat,Independent House/Villas).

      There are reports that Flat promoters who are unable to close their books in certain projects have slashed the rates by 30% in some areas of Chennai. Promoters also borrow money to build apartments and they cannot keep on paying interest.

      But this needs to be viewed in case by case basis.

      Though I bought a flat last month, I am receiving calls from promoters with whom I interacted 6 months back while I was shopping for a flat. Now they are ready to provide Free car park(Earlier it was 1 - 1.5 Lakh extra), Free Anti-Skid Flooring in restrooms, Free A/C provision all the rooms(Earlier it was in only one bedroom), Free Modular Kitchen,No Wood work labour charge etc

      If you are a cash party, then we can negotiate a lot. Dont trust on brokers.

      I think this is the right time. There were reports in a section of the media that the prices will come down further. Dont know how prophetic they are.

      Comment

      • #53

        #53

        Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

        Hi Wisemen,

        Hope you should have read about the ingredients of economic stimulus package announced by the government.

        Well, coming to RE government have reduced the cenvat duty on steel and cement and the prices are expected to drop around Rs 1000 - 1500/tone for steel and Rs 8 - 10/bag for cement.

        Government has also said that public banks will announce a special package for the loan amount of 5 - 20 lacks.

        What is your opinion on the outcome of this package

        1. Will RE companies start concentrating on affordable housing. Say a 2 bedroom 1000 Sqft flat for 20 - 25 lacks.

        2. Or They will reduce the sqft size of the flats say a 2 bedroom 700 sqft flats for 20 - 25 lacks. This case realtors are the beneficiaries.

        3. Job market in India is at it's worst. Hiring is freezed in all industries and segments. In this kind of scenario will consumers take a big decision like buying homes?

        Please let us know your opinion.

        Thanks,
        Sridhar

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        • #54

          #54

          Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

          Price cut is possible only when IT salary cut happens

          Though economic stimulus is released, my understanding is that minimum of 20% cut in flats/lands is possible only when the following happens

          1) Current IT salary should be reduced by >25%
          2) IT recruitment should be not be in 1000s (as its now) and it should be back to the old style where creamy layer folks will get though top IT companies
          3) Lay offs should happen (hate to say this being in IT industry but no other go ! )
          3) Sellers/Flat promoters should understand that the worst is yet to happen

          Thanks
          Mahesh K

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          • #55

            #55

            Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

            Problem cause is US ...

            Dear Sridhar and Mahesh,

            Sridhar, I'm 'wiseman', 'wisemen' is all you guys!

            Anyway, to come to the point:
            The source of the problem is the US. And now-a-days there is no need for "analysts" like me since even my pharmacist yesterday was telling me how this problem will go on for at least 3 years .

            Credit Suisse just today predicted peak US foreclosures by 2012 at 8.1 million homes. Imagine, currently it is just over 2 million homes. Think of the pain that is still to come.

            Another report today in Ecotimes is taking about large IT customers bargaining for discounts on both, new projects as well as current projects in the 5% - 7% range (this being for top companies, it will be much higher for mid-level and smaller companies). In many cases, given that Indian companies are still not serious about salary cuts and maybe job cuts, this kind of discounting will eat a big chunk out of margins and profits. This is apart from work disappearing altogether.

            So, I'm betting on big job as well as salary cuts coming up. I'm also betting on everyone waking up in Feb/Mar 2009 and exclaiming "Hey, that was an unexpected surprise!"

            The Govt has already given sops this year to Farmers to the tune of 60000 Crores. Anything happened for them, besides food prices going up for us? . Already there was hue and cry about deficits going beyond 5% even at that time. But FM was sanguine and told us that he had it all worked out and deficit will not even be 2.5%. Now it is heading for 10% levels!

            The Stimulus package is too little, too late. Now, the appetite of people to buy and spend is fast declining, once they have seen the situation in the US (this was not visible in April, so it would have worked then). So, what it will do is to draw out the few people still sitting on the fence to go out and spend - so that they will repent tomorrow when things turn down again!!! Yes, there will be mild upturn and some bullishness now for a month or two. Then what? Then elections will come and Congress will capitalise on this mild rise. Thats all this Stimulus was meant for.

            What the FM should have done is to bring in this package at that time. But it would have been political disaster if he had done it then. So, its Political expediency that take priority, not national cause.

            In conclusion, this is the problem as I see it. This weak, reactive response to crisis will only serve as adding fuel to the fire and prolong the crisis. People who would have otherwise saved money will now spend it on frivolous things like new Santro cars (when their 4-year old Maruti will work perfectly fine ) and be even less prepared for the net phase of downturn.

            Am still waiting for 2011-2012 period for bottom, since that is the kind of timeframe gaining wider acceptance.

            Incidentally, India's GDP growth is estimated to come down to 2-3% and China's to 4-5% from current levels. The World's GDP growth is estimated in 2009 to be anywhere from -1% to 1%. Just think of the kind of drop in economic activity at those levels!!!

            cheers
            Last edited December 9 2008, 12:23 PM. Reason: Info

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            • #56

              #56

              Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

              Hi Wiseman,

              It's ok to call you "Wisemen" as you posses abundant knowledge. I too think that stimulus package will have minimum effect as people only spend when their job is secured. So i don't think infusing liquidity is going bring cheers to common man.

              Even if Indian companies were able to access credit easily our economy to certain extent is also dependent on exports like textiles, software etc... When textile exporters don't have orders to export what is the use of this liquidity ( this is one example). My strong feeling is the problem is somewhere else not with liquidity

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              • #57

                #57

                Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                Originally posted by wiseman View Post
                Dear Sridhar and Mahesh,

                Sridhar, I'm 'wiseman', 'wisemen' is all you guys!

                Anyway, to come to the point:
                The source of the problem is the US. And now-a-days there is no need for "analysts" like me since even my pharmacist yesterday was telling me how this problem will go on for at least 3 years .

                Credit Suisse just today predicted peak US foreclosures by 2012 at 8.1 million homes. Imagine, currently it is just over 2 million homes. Think of the pain that is still to come.

                So, I'm betting on big job as well as salary cuts coming up. I'm also betting on everyone waking up in Feb/Mar 2009 and exclaiming "Hey, that was an unexpected surprise!"


                cheers
                You are true Mr. Wiseman. Layoff is coming. Recession hits BPOs, sector seeks bailout package

                Read this news:
                http://ibnlive.in.com/news/recession...e/80173-7.html

                Comment

                • #58

                  #58

                  Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                  Buying Time

                  For many years now, Business and Industries in India has developed only to cater the needs and requirements of the developed countries.These industies have flourished mainly due to the weak rupee and strong Dollar/Euro.Indian industries enjoyed large profit margin by selling their product in the global market as against in the local market.How many times have we heard tiruppur banians being exported, rebranded and sold in India at exhorbitant prices.

                  Its not a symbiotic producer-consumer relationship and all's not fair and straightforward.The developed countires like US, UK didnt Import or Outsource because the demands were huge and their local economy couldnt supply to them.The only reason was the "Cost Advantage and Cheap Labor".Capitalists and Businessmen saw that they could leverage their currency's strength and translate them into larger profit by using counries like India.

                  The phenomenon can be stated simply as "Developed countries used the developing countries to sustain their currency value at high premium, Developing countries supported them by devalueing their currency expecting higher returns from export".

                  How long can it be sustained?

                  The huge problem we are facing is not liquidity crunch but "De-Valuation".Assets and Currencies are being eroded of their value all over the world.The impact would be unimaginable.Experts also agree that dollar is diminishing in value very fast.Real Estate at present without doubt, is overvalued.

                  Lets assume $1 is Rs.50 as of today, Lets assume all business and transactions are done in Dollar.If a plot today demands 5 Lakhs or $10000.What happens if the dollar value becomes Rs.25? the capital value of the plot becomes 2.5Lakhs.Now, if the land has no demand in the local market or the international market.The plot owner has no other choice to sell the land at whichever price they get or wait till demand rises again, which will take a very long time to reach the worth of 5 Lakhs again.By then lots of irrepairable damage like job cuts,financial losses would have already happened.The same logic can be applied to any inventory/industry that hugely depend on Global Economy and Foreign Currency.

                  IT industry is only a facilitating industry, which supports other sectors like Banking,Insurance,Airlines,Retail,Telecom,Automobi les,Healthcare etc in doing their business.IT will surely be affected when the sectors they support are breaking apart themselves and have started to cut down their expansion plans and reduce costs.It would be incorrect to deem that RE boom was only due to the IT industry.There have been lots of factors easy money,high purchasing power,global market etc.

                  RBI is under huge pressure to maintain liquidity in the market, control inflation,maintaining the rupee/dollar value advantage,facilitating Indian government to maintaing GDP growth etc.The regulators seem to be doing a pretty good job.The Stimulus package is also one such effort.

                  With the Prices correcting 20-40%, Construction cost coming down, Proposal to build Affordable Apartments between 700-1500 sqft.Interest rate of 7-8% for Sub 20 Lakh loan, Possibility of Income tax exemption under Section 80I.The Government and Real estate cartel can only manage to spur some interest and attract people who have been longing to buy a home and who are not sure whether to wait or to go ahead and buy.

                  These efforts in my opinion can only provide some resistance and delay the inevitable by another 3-6 months.
                  Last edited December 10 2008, 06:50 PM.

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                  • #59

                    #59

                    Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                    Wow!!!

                    Originally posted by kar27us
                    a month ago an independent house in annanagar with 880 sqft land and building wa quoted by a broker for 90 lacs and the same broker now quoting a price for 58 lacs.you can see the drop.the name of the broker is sk estates and the ad is in 99acres.

                    Guys,

                    Wow! Can you imagine?!

                    The recession has barely hit and here we have a 35% decline and that too in AnnaNagar which could be termed one of the inner city areas.

                    As you go out of city radially, value/price drops will be even bigger!

                    Please think what will happen when the big job losses start hitting!!!

                    At that time there will be a wholesale rush to sell by many builders as well as many others who cannot pay the ridiculous amounts of money as EMI. I have used the word Avalanche and Tsunami many times in this forum. It is not lightly that I have used it.

                    And a correction. I used 1.1 million as total number of jobs in Indian BPO. Nasscom says it is 700k people employed. If that is true, a 250k job loss will not be 23% (per my calculation) but more like a 36% drop. This may be a blow that would be very hard for the Industry to take! It would create chaos with so many people with process and client knowledge going offline. Grim!

                    Now here is my question to people who constantly keep saying builders/others will not sell below cost price.

                    Do you really think that this 880 SFt house at 90 lakhs was built less than 58 lakhs? If so, are you telling me that the builder was making 35% profit or more? I do believe this house is going below cost or at least around cost.

                    Expect builders as well as banks (re-posessors) as well as individuals to start selling far below cost price as they stand to lose everything otherwise. Do not be surprised to see the 50% to 80% levels come up in the next 2-3 years. I'm firmly convinced of this especially now!

                    cheers
                    Last edited December 9 2008, 11:54 PM. Reason: Info

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                    • #60

                      #60

                      Re : Are Real Estate Prices Going To Fall 40% by Mid 2007?

                      This is the first time I am hearing a concrete evidence of price fall in Chennai. But, I am sure it is not going to be the last

                      The pace at which we seem to be heading towards the downturn is truly astonishing. Nothing seems to have bottomed out yet.

                      It is very worrying indeed.

                      Comment

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