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From Rediff: Housing Prices Could Fall 25% More...

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From Rediff: Housing Prices Could Fall 25% More...

Last updated: May 8 2009
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  • From Rediff: Housing Prices Could Fall 25% More...

    From rediff:

    Housing prices could fall 25% more...
    Property prices have been on a slow but steady decline over the past year-and- a-half. Experts predict that this trend will continue and one can expect a 20-25 per cent further drop in prices in the next year or so.
    While interest rate cuts by banks have been comparatively faster in being implemented, largely through the consistent efforts of the Reserve Bank of India [="http://money.rediff.com/money/jsp/quote_process.jsp?query=bank%20of%20india"][/URL]], the builder community has been reluctant to follow suit with ready price cuts, even when the uncomfortable truth remains that there is no choice in the matter.
    Cutbacks and compromises
    Though the initial interest rate cuts and a discounted interest rate for the initial year introduced by some banks resulted in a lot of loan transfers, new loans did not pick up pace on the expected lines.
    Another fact that contributed to this factor is the prevalent grim mood of the job market. People are wary of taking on new debt liabilities while struggling to meet their existing commitments. Builders who had been concentrating on high income groups and premium housing needs are now stuck with incomplete projects and lack of funds.
    The builders, sensing the buyer's mood, slowly started to relent and made attempts at slashing property prices. Prices have definitely started to slide in favour of the buyer. However, there have been several instances where there have been compromises over the square feet area of the house.
    For example, balconies have disappeared from floor plan, 1,000 sq. ft homes are being converted to 850 or 900 sq. ft. in a bid to make space for more apartments in a block, 544 square feet, single bedroom apartments which had practically disappeared are making a come back!
    So, there have been a lot of cutbacks from the offerings of several builders to enable slashing of prices and yet not make deep dents in their profit margins.
    On the other hand, builders have also entered into tie-ups with banks to offer discounts in the former of special lower interest rates, waiving off the processing fee, slashing the down payment rates, et cetera apart from other discounts of 10-25 per cent on the actual property from their side.
    Market reports are suggesting a slew of new launches announced have a price correction of nearly 30 per cent in and around Mumbai and Chennai.
    What needs to be done?
    As price cuts are now a visible reality for builders they need to make the most of the existing situation and identify new opportunities to counter the challenge of debt and losses they are currently facing due to the credit crunch in the present and the realty boom of the past.
    A bit of innovation, some significant changes in outlook and proactive help from the government could pull them out of the current mess.
    Innovation could be introduced in many ways. New building materials that are more cost effective could be used, for example use of prefabricated cement blocks can reduce cost by around 10-15 per cent.
    A possible tie-up between CMDA (Chennai Metropolitan Development Authority) and private players is in the discussion stages and there is dire need for mass housing needs for lower and middle income groups, which can provide some relief for private players who are currently struggling to finish projects.
    Recent statistics reports suggest that the urban population currently at 328 million is rapidly increasing and will touch 576 million in 2030.
    This means there is going to be a significantly huge demand for housing. So builders can take heart in the volume of requirements and adapt their real estate strategy accordingly.
    Builders are also expecting the government to pitch in and bring down stamp duty charges, taxes, etc to make price reductions more feasible.
    A strategic approach to affordable housing
    A methodical analysis of income profiles across sections should be matched with housing requirements. Depending on the percentage of population in a particular price segment, housing requirements need to be planned and accommodated. This can be possible only if the authorities and builder groups get together and formulate a plan of action based on surveys and recommendations.
    As housing is a key subject during the current elections, things are being implemented at a faster pace. In fact, one such development in the right direction involves a task force set up by the housing ministry in Jan 2008, with HDFC ] chairman Deepak Parekh in the lead.
    The committee has come up with significant ideas like revamping of State housing boards, upward revision of FSI (Floor Space Index), making available land conducive for construction, etc. More such evaluations should be brought to the table for discussion and accordingly new plans should be devised and implemented to evolve from the current situation.
    This is a time for review and change. The learning gathered from the past year-and-a-half should be the basis for a brand new start.
    The stage is set for a complete change in the real estate scenario that is more 'real' and 'affordable' to enable everyone to own a home
  • #2

    #2

    Re : From Rediff: Housing Prices Could Fall 25% More...

    Bear leader absconding

    Where are you Nataraj007. What is your reply. Things are not looking your way. Right time to quietly slither away.

    Comment

    • #3

      #3

      Re : From Rediff: Housing Prices Could Fall 25% More...

      Oops it should be bull leader.

      Originally posted by sundardj View Post
      Where are you Nataraj007. What is your reply. Things are not looking your way. Right time to quietly slither away.
      correction.

      Comment

      • #4

        #4

        Re : From Rediff: Housing Prices Could Fall 25% More...

        As expected by everyone results of real estate companies are pathetic.DLF and other RE companies are proxies to RE market in India whether bulls agree or not.

        DLF Ltd, the country’s biggest real estate developer, said its fourth-quarter consolidated profit plunged 93 per cent as buyers deferred purchases and the company was forced to offer discounts to customers at its residential projects.

        Profit dropped to Rs 159 crore in the three months ended March 31, 2009, from Rs 2,177 crore in the same quarter a year earlier, the New Delhi-based developer said in a statement. This follows a 69 per cent drop in the third-quarter profit.

        Another real estate company — Puravankara Projects — reported an 80 per cent fall in its fourth-quarter profit, underlining the real estate sector’s gloomy scenario.

        Comment

        • #5

          #5

          Re : From Rediff: Housing Prices Could Fall 25% More...

          Good news for home buyers

          Thats a great news for the people who want to buy an own roof on their heads. I feel housing, like all basic amenities should be affordable to all sections of people. So lets wait and see how the overinflated RE will come to affordable levels.

          Comment

          • #6

            #6

            Re : From Rediff: Housing Prices Could Fall 25% More...

            Originally posted by sundardj View Post
            Where are you Nataraj007. What is your reply. Things are not looking your way. Right time to quietly slither away.
            He too might have been washed away by the wave of RE falls

            Comment

            • #7

              #7

              Re : From Rediff: Housing Prices Could Fall 25% More...

              Originally posted by sundardj View Post
              Where are you Nataraj007. What is your reply. Things are not looking your way. Right time to quietly slither away.
              I have other business in life other than writing here. And who said prices have fallen. Please find one place where it has fallen and post it here!

              Comment

              • #8

                #8

                Re : From Rediff: Housing Prices Could Fall 25% More...

                Dear freind,

                It is a fact that prices have come down. I would not rather say, prices have fallen or collapse of RE. But the reduction in the prices may be due to :

                01) People adapt wait and watch and do not commit.
                02) Construction costs have come down due to reduction in material costs.
                03) Promoters reducing their margins.
                04) Promoters removing the frills.
                05) Use of cheaper materials/methods just enough to take care of the design/architetural needs.
                06) Lower land prices.
                07) Hard negotiations people do now for their flat buys.
                08) Reduced bookings.
                09) Black money may not be playing their more active part now in RE..

                etc. etc.

                ks2071746

                Comment

                • #9

                  #9

                  Re : From Rediff: Housing Prices Could Fall 25% More...

                  I agree demand has reduced. However let us see the facts. Let us use 100 as the base.
                  In the peak of 2007-2008 there were 100 sellers of which 90 were trying to sell IF A FORTUNE WAS AVAILABLE (like me!) and even in the remaining 10, five were looking for a great price not being desperate one bit and in the remaining 5, 4 were willing to sell if the conditions met them. ONLY ONE of the 100 was a DESPERATE SELLER.
                  The number of buyers then was probably 150 to 200 so the number of transactions was close to 50.
                  Now the number of buyers has come down from 150-200 to 50-75. However one must notice that the 90 FORTUNE SELLERS are not going to sell at ANY LOWER PRICE THAN THE PEAK. The remaining 10 has the 5 who wont sell as they are also not desperate. This leaves the 5. As I said before the 4 there will try to negotiate but might fail if they get CONFUSED by the BEAR CARTEL like folks on this board. Only that last 1 DESPO seller will sell at a cheap price.
                  Look at ratios. We are talking of 1 despo seller, 4 interested sellers and 50 to 75 buyers. WHERE THE HELL WILL PRICE FALL?
                  Just that the Bearish buyers need to hunt for that ONE DESPO SELLER.
                  So transactions have reduced from 50 to 2.5.
                  IS THIS A MARKET COLLAPSE OR JUST A BEAR HALLUCINATION OF PRICE FALL IS THE QUESTION! GOTCHA?

                  Comment

                  • #10

                    #10

                    Re : From Rediff: Housing Prices Could Fall 25% More...

                    With all due respect, everything in your message is fictitious, probably what you have in your mind. Get the facts straight.

                    Let's do this if you are interested. Put up an advert for your saligramam property for the price you want and let us know how many (exclude brokers) genuine buyers are coming forward.

                    I know you will bump up the numbers. We have our ratios to work out the actuals.

                    Thanks,
                    Salim.

                    Comment

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