Current scenario extremely bad. Worse expected. Core industries, GDP, Money markets all performing below par that is negatively impacting all downstream spends/investments like Retail, RE etc.

Normal souls will shy away from market in these troubled days;only brave hearts will hunt for opportunities.

Interestingly, two unique brave heart stories for you my friends, if they can inspire you - two bigger known groups in Kolkata bought two land parcels on either side of EM Bypass many moons back at dirt cheap rates; people were already wary of investing in those years of downturn, they even laughed at them both and actually were amused because both land parcels were not having the basic even-soil-levels; there were slopy patches, giving impression of hilly station sometimes. and more than that, Bypass then wasn't closer to what it is today..

They had the vision and guts. They knew better than anybody else that for RE or similar investments, LOCATION is the key...

Before you scroll down further to find out their details, let me tell you that one of them charges hefty premium for corporate/personal events like marriages etc. The other one has plaza, stores, theater etc.

This is what I call building assets - no other investment will stick with you like this for generations. Brave hearts wait for these times to make their kill. Sometimes I wonder that the difference between rich and poor is only discipline and its application over longer timeframes/over generations.

Make your best Guess !!

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Swabhumi & PC Chandra Gardens....
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  • Joydeep can you discuss a bit more about what this would mean for Kolkata real estate prices. Given that a large number of Kol buyers are end users, and many are employed by sectors that are experiencing a slowdown, do you think that there might be a correction or at least a slowdown in price rise?
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  • My friend, I guess, we will see a phase where there will be stabilization of prices first; this has started around 2 months back now. Now I don't hear that irrational 100 or 200 /- psqft rise every 2 months for projects. Also, you will see projects slowing down affecting our investments in existing projects !!

    Then, we will see correction of prices if the gloominess continues beyond the holding capacity of our rich Builder community. This will probably start happening after say 8-12 months for now. Alternatively, it may not correct, but you will see the days of additional goodies being offered instead of discounts. The goodies could be in the form of Modular kitchen, AC is master bedroom, EMI Interest sharing etc etc.

    If it continues beyond FY14, which I doubt considering GDP projections, then we will see a builders completely stopping supply in order to avoid correction and finally inevitable correction.

    Kolkata RE will not see a price crash as we commonly refer in Stock or Money markets.

    This is a phase where everyone likes to be on fences; major players make Investments now. This is a hard truth I learnt over the years quietly adoring these famed Kolkata groups as they mint money in next boom cycle. Real RE Brave hearts !!
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  • Joydeepbhai:

    This post is good. It gives "feel" of the " market"

    Please keep sharing when possible.

    I "smell" the language of a true RE investor in your posts.

    thanks
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  • Joydeep.. How do you want to differ Kolkata RE from other Tier 1 Cities ?

    Kolkata Market is End User driven, but no new development happening around kolkata, does the price will sustain further. What about the inflation and devaluation of Indian currency.

    Does really having a nice RE (Location+Builder) Investment gives you a better position in future or Gold is a better option ?
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  • Originally Posted by mayekar
    Joydeepbhai:

    This post is good. It gives "feel" of the " market"

    Please keep sharing when possible.

    I "smell" the language of a true RE investor in your posts.

    thanks


    My friend, appreciate your kind words. And Yes, these Ups and Downs in Kolkata RE really does affect me in more ways than one. Patience and perseverance are the key words here; let me see how long can I hold them faithfully. Like all downturns, I am hopeful that we will see the end of tunnel in FY14/15 due to domestic and international reasons.
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  • My friend, these are great thoughtful questions that came to your mind. I will try to present my 2 cents here -

    Originally Posted by sandipRC
    Joydeep.. How do you want to differ Kolkata RE from other Tier 1 Cities ?

    You may recall that earlier Kolkata used to appear within the Hot cities list of this IREF Home page. Now it is not. Actually, I have painfully go to the 'Other cities' link to get a complete list and then select Kolkata.

    May be just a co-incidence, but it might just reflect where Kolkata RE stands today Vis-a-vis other Tier 1 cities and what industry eyes & ears think about the potential of Kolkata RE.

    RE is an after affect of core industry growth although it is 2nd largest work generator after Manufacturing. This means RE has habitual follower mentality. Core Industry growth will drive services which will in turn drive RE, Retail etc.

    What we are observing here is below par growth of core industries, but certain good amount of services growth. This is quite unnatural unless there was a pent up residual services growth left. So, if this was the case for Kolkata, this will also soon reach its ceiling as businesses will/have already latched up to setup services. That's why, you saw job growth to certain extent as a direct co-relation to this and hence you also noticed a RE growth in last couple of years.

    This phenomenon will not sustain itself and soon there will either over supply in the market leading to halt of existing RE projects.

    Take NCR or Chennai macro-market as example. Chennai these days have captured the imagination of many companies from Automobile, Pharma and other verticals. This core industry growth is not being seen in our state unfortunately. NCR is a magnet where Central govt invests itself heavily driving Public Infra. Private industries or startups see Gurgoan as testing grounds for their products before they scale up India-wide. These are sentiment building practices that we notice in other Tier 1 cities in India. When on earth will we see our state and fellow brethren rise above and adopt and nurture enterpreneurism - is a question that will continue to divide Kolkata from other Tier 1 counterparts.

    Originally Posted by sandipRC
    Kolkata Market is End User driven, but no new development happening around kolkata, does the price will sustain further. What about the inflation and devaluation of Indian currency.

    I have also heard a lot of Kolkata being an end-user driven market. In fact, I used to support it as well to certain extent, but recently I have been thinking otherwise.

    My thought process is does it really mean much if people like you and me need our first homes for settling down. Yes, of course, it creates the demand. However, we have our shallow pockets which is for a general population case, can be attributed to lack of growth of core industry and following layers of industries finally benefiting cash-in-hand of end-users.

    We have a huge population within city or even in state due to legacy and recent migration of population. This means land price is getting upwards only which means builders can't provide products within the reach of shallow pockets of end-user bracket here.

    Eventually, this whole pent up real end-user demand rising on one hand and builders's inability to provide product within reach on the other hand is leading to a mismatch. Note my words, it is mismatch and not a gap.

    Lets take an example - If my shallow pockets allow 3500 psft in today's conditions, and builders can't provide the valuable product within my reach in good locations, I will still end up not buying even though there is a demand entry in books against my name. Either I will end up in suburbs or compromise on carpet area in locations of my choice or take a rent.

    Bottom line- Instead of real end-users driving demand, it is creating a mismatch. Supply is only being seen where end users/Investors can put in their money power. You will not see a product being delivered "within 3500 psft" in good locations today.

    That's why, I had stated in my earlier post that price could correct but not crash. If this was a "system", then there are players that control the supply side as per liquidity.

    The money market has really helped nail this phenomenon even further. The real benefiters of Rupee devaluation are investors and not real end-users barring a minuscule percentage of IT guys latching up their onsite opportunities to buy their first home.

    I am also saddened by a recent Govt clarification where parties interested in FDI in retail can't partner with existing local players. This means higher startup costs for new players which will lead to their delay only. This would have given some boost to core Retail back-end growth leading to ultimate Commercial RE growth and Residential RE to a certain extent.

    Originally Posted by sandipRC
    Does really having a nice RE (Location+Builder) Investment gives you a better position in future or Gold is a better option ?


    I am all for land/Residential RE investment. I belong to the school of thought that believes the yellow metal looks good on fairer as ornaments, but certainly not as an Investment. Portfolio managers might differ with me.
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  • Joydeep.. I appreciate your point of view. Investment in any asset has ups and downs, like a graph, better are those who can survive when the market is down so that they can get the gain when the market is up. Time period is main factor.

    Do you think that under construction flat is safe bet now, in this financial crisis. Do the builder get busted, what happen to your flat, lots of members in this forum had invested in under-construction houses ?

    Is there any criteria to chose a builder based of credit rating, like CRISIL Rating.
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  • Originally Posted by sandipRC
    Joydeep.. I appreciate your point of view. Investment in any asset has ups and downs, like a graph, better are those who can survive when the market is down so that they can get the gain when the market is up. Time period is main factor.

    Do you think that under construction flat is safe bet now, in this financial crisis. Do the builder get busted, what happen to your flat, lots of members in this forum had invested in under-construction houses ?

    Is there any criteria to chose a builder based of credit rating, like CRISIL Rating.


    At the moment, pl don't allocate fresh funds into under-construction property within a complex unless you have been noticing a fair pace of development already there by the builder. Very risky to get into it now unless absolutely sure. Having said that, it doesn't mean one with risk appetite and good deal in hand should not close one. That's when you will make money.

    With the new regulatory bill, I guess there will be several clauses that protect investor's interests through escrow account and different instruments like that. If developer is registered with CREDAI or have a CRISIL rating, one can certainly visit their websites for information. Good brand name will always help to certain extent. Having said all these, if DLF or Unitech could delay delivery in Rajarhat, what can we say about others??

    My point is One could be careful, but only be hopeful. There are many things beyond your control.

    What is disappointing is for other category customers who have already blocked a property by paying 10 or 20% advance or so, say a year or two back. Those projects may slow down as I said in an earlier post; the chances of it are very high. Only very fortunate ones will have their builders see through these difficult times and actually deliver on time.

    Interestingly, One of my acquaintances made an investment after all checks as much as possible, only to learn later that his soft launch investment in early stages (even before G+11 sanction was received by builder complex, only sanction until 4 floors was available at the time of booking !!) is getting delayed as Municipality approval for all floors.
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  • Great discussion and very informative. Do you guys think that in the next 2 years or so, the Kolkata real estate prices would just about keep pace with inflation (so an increase of about 10% a year) or the increase would be more than that?

    Do you think there might be a supply glut in some areas (especially the Rajarhat area). I'm not from Kolkata (but looking to buy as end user) so I'm surprised that there's very little discussion of projects in other parts of the city.
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  • Originally Posted by anthead
    Great discussion and very informative. Do you guys think that in the next 2 years or so, the Kolkata real estate prices would just about keep pace with inflation (so an increase of about 10% a year) or the increase would be more than that?

    Do you think there might be a supply glut in some areas (especially the Rajarhat area). I'm not from Kolkata (but looking to buy as end user) so I'm surprised that there's very little discussion of projects in other parts of the city.


    Very difficult question to answer. You will appreciate that price rise will certainly not only depend on location, but also on the fact that the micro-market itself is saturated or not? We will certainly see 10% rise in certain pockets.

    Rajarhat has been seeing a lot of Investor interest ever since its inception. Such markets react to market scenarios much more swiftly than end-user locations. Post 2009, we noticed that Rajarhat/New Town became stagnant and corrected a little, but within a couple of months in 2010 onwards, as RE in general started to look up, Rajarhat/New Town picked up much faster than all other locations. Today, you have to compromise a lot if you want a property there within 3500/- psft.

    In next two years, if things don't change for good, we might be in for a repetition of 2008/09 downturn post-affect to certain extent. The risk is you are trying to time the market.

    Yes, you are correct; Rajarhat/New Town being a proud jewel in the crown of state RE, as citizens, we tend to overlook other hot locations within Kolkata. The part of the reason being most of the forum members are young Information technology Next-gen guys as I understand, and hence understandably, they want to stay closer to work. There are many threads for other locations. If you have any specific area in mind, pl post here.
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  • Rupee touching $60 , will it impact RE ??
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  • My feeling/perception is from a purely economic perspective, WB & hence kolkata have fallen in all economic indicators. Worse thing is things do not look good for the future. What effect will that have on Real Estate in WB? Let me explain further below:

    I don't see many-(new/few/no??) value added industries in Kolkata. WBs per capita GDP is now below National average. Things have gotten worse in the last 2 years. My perception is(both from first hand experience and from reading news) is that nowadays even unskilled labor is finding it hard to find employment in WB. Unskilled & lower value skilled labor(e.g. masons) are now moving to work in places like Rajasthan(part of so called BIMARU states). Skilled labor of course has been fleeing for a long time and in the last few years the trend has accelerated. In addition, the current TMC govt and it's CHIEF do not give much hope that things will improve for the future. I found it weird when people are ok to pay Rs 4 to buy 1 rosogolla/sondesh in Kolkata, but the government has kept the price of the 0-5 KM Metro route charge at Rs 4!.

    The only good news I got is a friend who runs a software company in Mumbai is now hiring in Kolkata, because cost of developers are too high in Mumbai,Delhi,Bangalore. So, maybe new IT firms will move into Kolkata due to lower labor costs.

    Having said that, since the bad news overwhelms the good news, now, the question is "why would I be bullish on on Kolkata Real estate for the next few years"? Who are the current investors or future investors in real estate in WB? Are they more likely to be NRBs (Non Resident Bengalis/non-Bengalis) who live outside Bengal but invest in Bengal? (at least for medium/higher end projects). i.e. Where will the demand come from?

    Obviously, lot of people live in WB(most densely populated after Bihar) and there will be continued demand, however the economics says, other states will be better places to invest?

    I live outside WB, so will be interesting to get people's take on this. What am I missing or where am I wrong?

    Some links:
    Gen-Y logs out of Bengal
    After Bengal, now Railways too reluctant to invest in Kolkata Metro
    https://en.wikipedia.org/wiki/List_of_Indian_states_by_GDP#List_of_states

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  • Originally Posted by joydeepr1

    In next two years, if things don't change for good, we might be in for a repetition of 2008/09 downturn post-affect to certain extent. The risk is you are trying to time the market.

    Yes, you are correct; Rajarhat/New Town being a proud jewel in the crown of state RE, as citizens, we tend to overlook other hot locations within Kolkata. The part of the reason being most of the forum members are young Information technology Next-gen guys as I understand, and hence understandably, they want to stay closer to work. There are many threads for other locations. If you have any specific area in mind, pl post here.


    Joydeep - thanks so much for your reply. Yes indeed, trying to time the market is always fraught with the risk of getting it horribly wrong. But given the economic data I see, and the currency arbitrage advantage I have, I think it wouldn't be terrible for me to assume that there might be a correction (at least in $ terms if nothing else).

    I'm buying end user property for my retired parents, so clearly they are not interested in Rajarhat and would prefer to live in an already developed para. We have zeroed in on Laketown, Dum Dum Park, VIP Road but I'd be open to suggestions about other areas as well.
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  • Originally Posted by niray9


    Having said that, since the bad news overwhelms the good news, now, the question is "why would I be bullish on on Kolkata Real estate for the next few years"? Who are the current investors or future investors in real estate in WB? Are they more likely to be NRBs (Non Resident Bengalis/non-Bengalis) who live outside Bengal but invest in Bengal? (at least for medium/higher end projects). i.e. Where will the demand come from?





    Those are all excellent questions and we should discuss more.

    When I look at the data on the overall economic outlook, job market and investment, I really don't understand how I can be bullish on the Kolkata RE market (as an end user I interpret this as a delay buying decision).

    The NRBs are a significant segment. Practically every NRB I know has bought real estate in Kolkata, even if they had no roots in the city (but were from other districts in Bengal). But is the NRB investor group so significant that they can hold up the sort of prices we see in Kolkata these days. Kolkata is more expensive than Hyderabad, and the economy of Hyderabad is a lot more robust.

    Kolkata only appears a bargain if you compare it with overheated markets like Delhi, Gurgaon, Noida, Mumbai etc. Compared to Hyd, Chennai and Bangalore it is quite pricey.
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  • Anthead & Niray9 - Appreciate your valid concerns. I agree on all your points-
    1. NRBs segment can provide boost to a growing RE scenario, but it can't support a gloomy environment.
    2. Kolkata is extremely expensive these days compared to other comparable metros.
    3. There is a challenge on the politico-eco affairs of the state; there is a mis-alignment with Center. Surprisingly, did you guys read a recent news that Planning Commission allocated more than what Gujarat had demanded? For WB, we kept fighting and were given less.

    The good days will come for sure, but Kolkata will not lead the return of golden days next time. It will more like - 'others are improving, so it will also improve as an after-thought'.

    One silver lining though not a strong factor - The socio fabric is changing. Nuclear families are driving up rental or new low/medium segment homes.

    Bottomline - I feel that as an RE investor, the learning point is to make smaller investments to make SELL easier rather than a crore plus property that is good to have, but doesn't/willn't sell out easily.
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