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


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

Last updated: February 21 2009
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  • #81


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

    For all those silly doomsdayers on this board. Many of those Wisemen probably dont understand mathematics. So for the rest.. News is that Carborundum Universal Ltd, the Murugappa Group company, has sold 4.4 acres at Pallikaranai for Rs 58 crore. 58cr for 4.4acres means 13.18cr per acre. An acre is approximately 20grounds. However if somebody takes an acre and creates a layout with roads he will be forced to have only 10 to 12 grounds of usable land. So if we go by 20ground logic then one ground in this place costs 13.18cr/20=66lakhs. However if we use the logic of 12 grounds effective usable area then the cost of a ground goes to 1.1cr.
    In other words on Dec 1st when this article has come up in Hindu, land price in a place as far away as Pallikaranai is 1.1cr per ground.
    Just to give a feel of the price in this area even an year ago. It was costing no more than 40L per ground. So are the doomsdayers WANTING A FALL or is there really a fall?
    Now one must realize there is a clear difference. Builders are quoting astronomical profit margins, not today, not yday but for the past many years. So if you buying a flat and if the fella sold it for 5200psft and then reduced it to 4800psft, it only means the builder is fooling u lesser nowadays. So going back to this Carborundum land. Miles away from this property India bulls is selling flats for 2700psft. If this land of Carborundum is constructed even fairly at 3.5 FSI for Multi storey building then the price will be (3.5x1200+4000)/3.5=2350psft. 1200 is the cost of construction and 4200 is the psft cost of land there (1.1cr/2400=4000approx). However a typical builder will quote a price of Rs 4000psft given Indian bulls price of 2700 at a much lousier location. So the margin is Rs 4000psft - Rs 2350psft = Rs 1650psft. In other words if the person quotes 4000 or 3600 he is yet in mighty profit. This means that builders are lowering their prices and profit margins but realestate price, the intrinsic price of land is not going down. It is yet to shoot much higher much against the wishes of the STUPID Wise cartel.


    • #82


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

      Originally posted by vijai5
      Dear wiseman

      What happens when the fed starts printing money...

      What a simple question? When Fed prints notes, Wiseman will print more stupidity on this board. You did not even know that? Shame on you. ROTFL.


      • #83


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

        Originally posted by wiseman View Post
        Dear Vens,

        If you are an ex-banker, what you say about forex goes and thats that ! I'm just a software guy trying to make sense of the economic climate and how it will affect us all!

        ks207... bear with us. While what we say sometimes does not have to do with RE, it will eventually have the greatest impact on everybody's RE assets and therefore people holding RE - especially at high prices - must watch closely and take defensive action; or repent later.

        My hypothesis was that we in India are on the brink of massive problems and the tipping point will be accelerated job losses. To put a figure to that, I guesstimated it to be around 300k to 500k (worst case) in the IT business and even more than that (was not able to guess the figures) in the BPO/ITES business.

        Well, I did some more digging and here are some of the figures I could lay my hands on. I think in India, the bodies/associations that are supposed to track the industries are either deliberately keeping data fuzzy/unknown so that no external person really gets a handle on things, OR they are extremely incompetent - take your pick . How do you analyse data about the industry you represent without credible data - and therefore what is your own credibility?

        The IT business is supposed to be having around 2.2 million employed. And the BPO/ITES business around 1.1 million (as per NASSCOM report of some vintage). Someone please give more recent data!

        Here's a quote from EcoTimes of yesterday:

        The Business Process Industry Association of India (BPIAI) President Samir Chopra has been quoted in the Economic Times as saying that the economic slowdown in the US and other developed countries could lead largescale job losses in India.

        Employees working for the BPO industry may find it worthwhile to fasten their purse strings tighter as there could be as many as 2.5 lakh jobs lost in the first quarter of 2009 if an apex industry association is to be believed.

        Also ...

        However, Chopra also sees a silver lining in the clouds where he believes that the recession would compel more companies in the US and Europe to look at outsourcing as a way to cut costs and improve efficiencies.

        The article in the Economic Times also quotes Praveen Sengar, Head of Software, Services Industry vertical at IDC ...

        Me: However dark the cloud, we must always paint the silver lining to hold our own jobs and the messenger is not shot, right? Even if the silver is still not really there yet?

        Well, the cat is out of the bag and this implies a nearly 23% decline in employment!!! What will it do to growth numbers? What they are not telling you is that growth in 2009-10 will go from 20% UP to maybe 25% DOWN?! That huge 45% swing would be devastating! How many people would do the math and come to that conclusion? And what do you think will be the ripple effect it will have on the economy (since for every person employed directly, there are around 3 people indirectly employed and IT/ITES contributes to 35% of overall exports!!!). IF this is true (and we will know in next 3 months) this will have a devastating blow to the economy in 2009-10. So, do you think this recession will bounce back in 2010 itself? After being given a body-blow in 2010? Its like saying the man has had a bad accident today and we expect him to be up and running tomorrow! I expect the numbers to go up as the recession/depression progresses in the US and I presume the bottom should take at least 1-2 years after the worst hit? This problem is not ours and not created here. This is a US problem and we will have to wait till they come out of it, no other choice!!!

        Well, this data is surprising to me as well. IF this comes true (at least some of it will since IDC would not have put a whimsical report without sufficiently scary data to support it), then we have only a max of 3 months to take action - what ever that may be!!!

        We will still await similar news from the IT business which could be larger, given that the base is larger - but bigger companies' contracts are more long-term and thus the impact may be a little less severe; though not a whole lot less. We don't know yet. Keep fingers crossed.

        So, whats the point?

        The point is this. The Industry has, like everyone else, has been in deep denial till it is nearly too late!!!

        The primary defense by the industry bodies about why jobs will not be lost was that, with recession in the West, companies will only look to even more outsourcing. This is true.

        But they did not see the bigger issue. That while we may get a bigger slice of the pie, the overall size of the pie would seriously decline and thus the absolute numbers here in India would also decline seriously.

        Over 80% of our BPO jobs come from only the Fortune 500 companies. Did you see job losses in the US in November? Half a Million people lost jobs in one month alone!!! What we are missing here is that these jobs went because the work supporting these jobs DISAPPEARED! Thus work does not exist for it to be shipped to India or elsewhere. It simply disappeared!

        This is called contraction. From a family sized pizza (of 12") it is slowly becoming a personal sized pizza (6").

        Finally: This job loss will also shrink the size of the pie in India (like everywhere else). Resulting in job losses, salary cuts, etc, etc. Please get real about your large sized debts before the wave actually hits (now as soon as next quarter, they say!).

        Will RE prices decline by 40%? I definitely think so now!

        Sorry for sounding so pessimistic, but I believe I'm being realistic. Now the Industry people are saying the same thing in fast-forward mode, so it must be getting serious.

        cheers (whatever that means in this context)
        Cant read that long shit of a message from u wiseman, but it is clear. U r a software engineer talking economics based on whether ur boss is firing u tommorow or the day after and the day he does it u will be full time on this board crying.
        IF U DO NOT KNOW WHAT THE SHIT U R WRITING HERE THEN STOP WRITING HERE. What do u know about ECO 101 course? Is it ur personal 101 course which reads, WHEN WISEMAN SAYS BEAR IT IS BEAR?
        U really are a nut loose on this board with silly chamchas like Strong. Explains why I dont try to get into argument with you for quite sometime. I dont want to throw stones at shit as it does not benefit me. So u r free as u r as I said XXXX.


        • #84


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

          Now that the fact is out that Wiseman is a software guy with no exposure to realestate whatsoever, trying to explain shorting a call, for which I can always propose shorting a put (I dont have the time to explain that like him! and I dont get chamcha ids like Strong to talk heady about such simple stuff). It is high time people realised that WIseman knows nothing about realestate.
          So if u sold out like he is asking u to do, well u cant be forgiven. Cheers.


          • #85


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

            Will someone stop Natraj from entering the forum. He is too good for this forum and we are so stupid to understand his theories.


            • #86


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

              fall in land prices

              Dear Natarajoo7,

              What i understand from your post is that you believe land prices will not come down even if flat prices do because the reduction in prices is only a reduction in profit margin.Iam very curious about this point.Can you
              substantiate your claim with relevant examples from the past ?
              I would like to invite other members' opinion also on this particular
              thanks in advance


              • #87


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

                Plot price is dependent upon flat price

                If the margin for flats is coming down, Then naturally the price of land also will come down. within few month or one year rate of flats in city will come below 3000 per sq.ft. If there are are very less buyers and if finished flats are not selling fast, new projects will not be taken much.

                Rates for vacant land is shoot up only because of flat promoters.If these promoters are not willing to buy land in city, definitely price will come down.


                • #88


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

                  This was a last year Dec deal


                  Are you referring to this deal.


                  This was last year, Dec 2007.


                  • #89


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

                    PLOT Price Example !!!

                    This is our typical Indian Mentality that Land is always a better option for Investment. But I have a bit different view on current market situation. I dont know how many people has seen the news of Satyam share value falls of 30% in 10 min.

                    Lets take a example of plot selling :-
                    1. We almost sure that in another 1 yr there will be no change is plot value. It may reduce but no increment.
                    2. Your present land value is 100000 but you are expecting 110000. That means you are expecting 10% higher than the market/asking value. I have taken small amount for simplicity.
                    3. Now you are thinking should you sell it or not as you are getting 10% less than expected.

                    If you don't sell :
                    1. You will not loose 10%.
                    2. Your land value may fall.
                    3. No increment in rate.
                    4. very marginal Increment after a year.
                    5. Need to pay tax and maintain the Plot.

                    If you sell:
                    1. You will loose 10%.
                    2. You get some Increment in the rate.
                    3. You don't have to pay tax and maintain the plot.
                    4. You can encase the amount and use some where else.

                    I believe selling will be better option if you are not willing to build a house in near future. You might get Better return if you keep the amount in FIXED Deposit which is assured. You can utilize your money in some other way. If you are planning to take some Personal Loan you can use there. Instead of giving High Interest rate....
                    Either land or AIR and FOOD. Choice is yours.


                    • #90


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

                      What a over simplistic approach? People hold land not for fun. It is not easily tradeable like stocks. There are fellas holding Reliance shares for 2 decades. In case of land, people hold it for generation/s. So your idea is not correct even one bit. Flat buyers are todays beggars, also called as IT, BT etc employees. Land owners were yday's kings, they may not have all become beggars. So many wont sell it. BTW the return on plots is not a silly 10%. I have an example of multiple lands where the return over 20+ years works out to anything from 25% to 35% cumulative per annum. This with the added fact of no tax until it is sold makes it an ideal investment. Cheapos buy flats to get next month return but long term returns are only available on land.
                      I find most on this board belong to this IT group, PUDU PANAKARAN or PAZHAYA PITCHAKARANS. So they dont understand reality!


                      Have any questions or thoughts about this?