Same in year 91 when stock markets crashed, kandivali prices came down by half.

I guess the story is going to repeat now in few weeks...
Read more
Reply
15 Replies
Sort by :Filter by :
  • Realty rates are backed by Fundamentals... not sensex linked

    Originally Posted by dot_net
    Same in year 91 when stock markets crashed, kandivali prices came down by half.

    I guess the story is going to repeat now in few weeks...


    I think you got all your fundas mixed up
    Realty markets are more driven by fundamentals than the senex
    With cost of costruction, TDR and all input costs coupled with double digit inflation, there is no way rates can come down by 50%

    Please do not indulge in such misleading stuff
    CommentQuote
  • Downturn bites...

    Originally Posted by Pinnacle
    I think you got all your fundas mixed up
    Realty markets are more driven by fundamentals than the senex
    With cost of costruction, TDR and all input costs coupled with double digit inflation, there is no way rates can come down by 50%

    Please do not indulge in such misleading stuff


    Sir, Its quite possible you may have not seen bear market in Real Estate. Prices in most part of Mumbai fell almost by 50% in a space of 4 years between 94 and 98. Your logic of increase in input costs applied even then. Please DO appreciate that there can be a Bear market in Real Estate too. Even if Oil remains at the current level or even decreases by 10% the Indian economy will be shattered if the entire Oil burden is passed on to consumers. Just for a 5 Rupee increase in Petrol Inflation is 11%. Imagine what will happen if the 21 Rupee shortfall in Petrol (and corresponding shortfall in Diesel) is passed on to the consumer. Interest rates have to hover around 14% and this will destroy the already flagging real Estate market.
    CommentQuote
  • Dont correlate STock market and realty - Part 1

    Originally Posted by Yuvaraj
    Sir, Its quite possible you may have not seen bear market in Real Estate. Prices in most part of Mumbai fell almost by 50% in a space of 4 years between 94 and 98. Your logic of increase in input costs applied even then. Please DO appreciate that there can be a Bear market in Real Estate too. Even if Oil remains at the current level or even decreases by 10% the Indian economy will be shattered if the entire Oil burden is passed on to consumers. Just for a 5 Rupee increase in Petrol Inflation is 11%. Imagine what will happen if the 21 Rupee shortfall in Petrol (and corresponding shortfall in Diesel) is passed on to the consumer. Interest rates have to hover around 14% and this will destroy the already flagging real Estate market.


    Dear Yuvraj,
    I am a Realty Analyst and been tracking the industry since 1990 and have seen all the business cycle here. I have never said that the Realty market is immune to a crash. All i said was statements like property will fall by 50% cos stock market crashed by xyz doesnt hold true

    Every one is aware that price is always a function of Demand & Supply. And even at stratospherical levels, there will be Buyers of such high priced properties. Are you aware that more than 45% of the realty sales in India is driven by slush money which has no bearings of any inflation or other related casualities.

    There is an interestin article on the financing of Realty in today's TImes of India front page.
    _-----------------------------
    Moneylenders funding cash-crunched builders

    Nauzer Bharucha | TNN



    Mumbai: They could be dismissed as a nondescript group of people chatting on the lawns of an exclusive club or strolling down Marine Drive. Their clothes are quiet, their gait without swagger. Indeed, it’s hard to believe that these are the very men who have a vice-like grip over some of the biggest builders in the country. They are India’s wealthiest moneylenders who, even as the banks tighten their belts, loosen their own purse-strings.
    With financial institutions and banks increasingly restricting loans to developers, these moneylenders—primarily belonging to the Sindhi, Marwari and Kutchi communities—have stepped in to play their part. “Builders have been approaching them in droves for loans at phenomenal interest rates ranging anywhere from 20% to 36% annually,’’ said an insider, who is aware of this powerful financial world that operates in secret. “These money-lenders are mainly active in three cities—Mumbai, Bangalore and Chennai. When money has to be raised, phone conversations are avoided,’’ one of them said.
    The source confidently said that the amount of loans these unofficial moneylenders have disbursed could well run into thousands of crores. The loans are given to builders for short periods, from three to six months. They range from a couple of crores to as much as Rs 100 crore. If the amount is substantial, about 10 to 15 of those in the group come together to fund the project, it’s learnt. The builder has to mortgage his property to the investor in case he fails to pay up. The loan is given both by cheque and cash—the latter comprising as much as 40% of the loan. Politician, matka kings among big realty players
    Mumbai: The moneylenders who bankroll mega housing projects and unofficially help keep the wheels of the economy moving are the stuff of legend. “They are literally sitting on tons of cash and some of their families have been in the business of money-lending for the last 500 years,’’ a leading investor told TOI recently, requesting anonymity. He elaborated, “Over a century ago, these families had such a strong reputation that their cheques and promissory notes were honoured by the emperor of Japan, the czar of Russia and the shah of Iran.’’
    Private money-lending has had a big role to play not just in real estate but in entertainment in the days when official funding was hard to come by. “In the 1940s, the Hindi film industry survived on their money,’’ said the investor. “It was from the 1950s onwards that they entered the real estate field. Today, some of the biggest developers in the country turn to them for loans.’’
    Among other big investors in construction are diamond merchants who, it is believed, have a stake in some of the biggest residential and commercial projects in the city. “But many diamond merchants have burnt their fingers because of the crash in the stock market,’’ real estate sources said.
    Apart from the traditional money-lender, there is another category of property investors who function in a more shadowy way. They are the big-ticket matka operators from Gujarat who have a large stake in several residential projects in the suburbs. TOI has learnt that at least a few builders from the eastern suburbs have started their projects with the help of slush money provided by these operators.
    “It is well known in the industry that certain builders have suddenly shot to prominence—from being virtually nobodies to big players in a few years. Some of them proudly claim that they have never taken loans from financial institutions but manage to raise funds through private sources,’’ a developer pointed out.
    Then there are the politicians. Their footprints are found in virtually every major slum rehabilitation scheme in Mumbai. It’s widely believed that many builders are being backed by politicians, including ministers, from different political parties. One construction group has seen its fortunes steadily rise over the last five years because of its political connections. The group targets slum redevelopment projects and bulldozes them after first threatening the more obstinate slumdwellers and then evicting them overnight.
    Another financial services company, which has a huge stake in real estate, has shot to giddy heights in seven years and its influence over policy-makers is mainly due to the alleged support of a powerful political family based in Delhi. The family has invested its slush funds in this company. “In the construction industry, some developers are known to be associated with certain politicians. Several of the big land sales have been funded by these politicians,’’ a source said.
    -----------------------------------------------------------------------------
    CommentQuote
  • Dont correlate STock market and realty - Part 2

    Originally Posted by Yuvaraj
    Sir, Its quite possible you may have not seen bear market in Real Estate. Prices in most part of Mumbai fell almost by 50% in a space of 4 years between 94 and 98. Your logic of increase in input costs applied even then. Please DO appreciate that there can be a Bear market in Real Estate too. Even if Oil remains at the current level or even decreases by 10% the Indian economy will be shattered if the entire Oil burden is passed on to consumers. Just for a 5 Rupee increase in Petrol Inflation is 11%. Imagine what will happen if the 21 Rupee shortfall in Petrol (and corresponding shortfall in Diesel) is passed on to the consumer. Interest rates have to hover around 14% and this will destroy the already flagging real Estate market.


    There are phases of appreciation and depreciation in all markets ( bears n bulls ) But in 2008, input costs are the highest.. be it cement, steel, labour, TDR, land cost, permissions etc.... Are you aware of the number of NOC's that has to be procured to construct a single building and the speed money that applies to these ? In short, if prices fall, it will not make sense for a develper to make buildings and run into losses. He simply holds on to the land bank as currently there is no TAX on vacant land

    In the 90's falls, the spree began due to speculators and today there are more investors than specualtors who have a long term perspective. If they have earned 200% in last 4 years, they would not mind a hit of 20-30% loss in the profit if they have to hold on. And specially in case of apartments, that are ready, the paltry rentals at least take care of part of the EMI and the maintenance.
    CommentQuote
  • Ram

    Correction in the real estate market is round the corner. I am in Mumbai since past 20 yrs and cannot digest someone quoting 9000 per sq. ft in Thane and over 7000 in Kandivali.
    As real maket had a boom time the valuations of all the property have gone to a very high level very people cannot BUY anymore.
    It has to come down, by how much in for which areas / properties is only a question.
    last time sotck market crashed and so real estate followed, it is just a matter of time ... looks like
    CommentQuote
  • quote from another thread.. same issue..

    Coming Property Crash
    One persons loss is another persons gain.

    Sellers:
    If you have any property for sale, sell it now. Dont be greedy. Else you are in for a big loss.

    Buyers:
    Dont buy property now. Wait for 6 months. If things are going down, wait another 6 months. The property rates are going to crash.

    Here are the reasons:
    1.) Builder/Politician nexus has caused the hype.
    2.) The prices of real estate has increased by 3-5 times.
    3.) Supply is more than demand for such premium prices properties.
    4.) Salaries/Cost of material/Labour has not increased in the same ratio.
    5.) There has hardly any improvement in infrastructure.
    6.) No value added. Same traffic jams and trash once you get outside the community.
    7.) Interest rates have gone up. Monthly instalments are becoming impossible for even profesionals. Not everyone is IT-Project leader.
    8.) Stockmarkets have collapsed. DLF stocks has gone down significantly.
    9.) There is liquidity crunch. FIIs have taken the money out to compensate for their losses in US due to sub-prime crisis.
    10.) If you buy a property now, be prepared to stay in it for 5-10 years. You will be lucky if you can find a tenant who can pay 75% of your monthly mortgage. So you will loose 25% every month on interest costs and even more if the property prices go further down!
    CommentQuote
  • IS correction be gona as high as 50% ?

    PROPERTY BOOM COMING TO AN END, SAY LENDERS
    Mumbai
    Mint

    India's five-year property boom is coming to an end as the supply of housing increases, borrowing costs rise and a stock market rout erodes buying power, according to executives at two mortgage lenders.

    Prices across India may drop as much as 15% in the coming months, said Keki Mistry, vice-chairman of Housing Development Finance Corp. Ltd, India's largest provider of home loans. Gagan Banga, chief executive of Indiabulls Financial Services Ltd, said prices may fall as much as 20%.

    India's central bank signaled it will raise borrowing costs further after increasing rates this week to the highest in more than six years, curbing demand for loans. The country's property market may avoid the meltdown seen in Spain, the UK and US because of lower indebtedness and a housing shortage estimated by the government at 24.7 million units, the executives said.
    CommentQuote
  • ??

    Stock is around 13 K.. again

    How long we still need to wait for housing prices to come down ??
    CommentQuote
  • I'm the BIG DADDY around here! :)

    Just kidding about the title :). I have read this post and replies thereof with considerable amusement.

    Mr. Ram. Your experience in the Real Estate market only spans the period 1990 till date. May I remind you that the world - and India by inference - has seen one looooong Bull Market from 1982 all the way till 2007. So, your experience does not include any real Bear Market. And that can be very dangerous when the real bear comes calling!!! Today, that Bear is knocking urgently at the door of American and European Financial Institutions. Soon it will be knocking the stuffing out of most Western companies across the spectrum. Since much of India's Economic Boom is based primarily on export-led growth and (more importantly) profitability, it will also knock the stuffing out of our Export industries.

    Human beings generally do not learn from others mistakes. And if they also have a stake in the topic being discussed, it becomes even more difficult not to be blind-sided.

    So, I believe, is the case with Shri Ram (or Pinnacle). His central argument for why prices should not fall more than 50% is that the builder paid such-and-such price for land, cement, etc. And he will not sell below cost.

    REALLY?!! Interesting! That holds true under most normal circumstances. But to generalise this argument and state that it will never happen under any circumstances is where the argument goes wrong in logic. And I believe that this coming "Big Daddy of all Global Crashes" is going to prove Mr. Ram very wrong as well as give a whole lot of people a very painful lesson in "what can never happen" where money is concerned.

    I humbly disagree, Mr. Ram. You have the advantage over me in being a Real Estate person since 1990. But I bought my first property way back in 1986 and have seen 4 Bull and Bear markets in Stocks and 2 in RE. I have seen Realty crash by 80% in the most prime areas in the 1995-98 crash (and we didn't even have a Global Crisis then!!!). So, does that make me a better person in predicting? Can't say! And when faced with bankruptcy, a builder will not look at a mere thing like cost of building. He will sell at any cost and that situation defeats your central argument of "not below cost".

    This time, I stick to my prognosis that Realty in many bubble cities will crash by at least 50% and upto as high as 80% in some areas.

    And that it will take quite a while for people to start taking risks again and bid up prices to where you saw them in 2007. These prices may only come back a decade later.

    Btw, as per my analysis the Sensex may go as low as 8800 within the next 2 years. And Realty Stocks are very reliable indicators of the coming bloodbath in Realty prices. Stock prices are always a reliable indicator of the coming trend in the underlying industry - across all industries.

    Sobha recent low is 169/- - 13.5% of its peak price of 1248/-
    Parsvnath recent low is 94/- 15.7% of its peak price of 598/-
    ... even DLF is down 72% from peak prices.

    We may even see some of these companies going bankrupt as they are desperate for cash (at what price do you think Sobha can do a rights issue for 400 crores when they have sold IPO at 540/- and most investors have bought it even higher? This rights will fail and so could Sobha). All means of financing are effectively shut off!!! And they have huge inventory to be sold and demand (as well as capacity to buy) is falling off a cliff. Bank Loans, Foreign Debt, Private funding thru debt or equity - everything is shut off. And real interest rates are skyrocketing.

    When job losses and salary cuts start steepening when our IT companies start losing projects and all kinds of people start dumping homes bought at 7.5% interest paying 30k EMI - which have now gone to 60k EMI on 14% interest, you will see REAL distress. This will come soon enough.

    Please be patient ;).

    cheers

    Originally Posted by dot_net
    ??

    Stock is around 13 K.. again

    How long we still need to wait for housing prices to come down ??
    CommentQuote
  • BSE -- below 10K. What is the property value in Mumbai :D
    CommentQuote
  • Arin, you are quite right, but may eventually turn wrong!

    Originally Posted by arin_12
    BSE -- below 10K. What is the property value in Mumbai :D


    Mr Ram said that one cannot make a blind thumbrule that if Sensex is so-and-so, a specific price in a specific area for RE will be so-and-so. ABSOLUTELY AGREE since this would be a rule based on fantasy!

    I stated that RE Stock prices are very accurate indicators of what is coming in RE prices. Therefore, if most RE stocks come down to 80% of their peak, RE prices will have similar falls from their peak. This is true (in my experience in ANY industry with widely held stocks be it Chemicals, Paper, Retail, whatever). There are some SOUND REASONS for this we will discuss later.

    Now Arin goes on to conclude that what it means is, when RE Stocks goes down to 20% of peak, IMMEDIATELY RE prices also should go down similarly. And if it doesn't, the rule is wrong!!!

    SORY FOLKS! Shows a fundamental misunderstanding of the 2 markets. Stocks are very well regulated, have a transparent and continuous price discovery system (market trading), has fine granularity (meaning I can sell shares one at a time, but cannot sell land 1 SqFt at a time ) and is not as emotional a purchase as shares. RE has exact opposite characteristics. RE purchases also generally happens only once in our lifetime for many of us (of course, now-a-days speculators trade in RE but they are in for nasty surprises like speculators in any market!)

    RE cycle time is longer and cycle shape is different. But, end result will STILL BE THE SAME. Prices will crash similar to RE stock prices.

    Please be patient. Ecotimes has already run an article yesterday about how, when the assets of RE companies (land banks, flats, etc) are mortgaged to raise emegency loans at 30% or higher and when the sales (hoped for in next 3-6 months) do not materialise, AND when increasing job losses in our export sector leads to distress among home owners and banks starting to reposses more homes which they will want to sell ASAP, you will see a RUSH TO THE DOOR by too many "homeowners" with too few buyers.

    Then the real price declines will start. That should start happening pretty soon now, maybe even post Diwali when Banks and RE companies realise that buyers are not coming in anymore.

    In Bangalore I hear that a leading quality builder who has built flats at a raw cost of 1600 per SFt is having a hard time selling it at 1750. So prices in some cases are already below cost.

    cheers
    CommentQuote
  • I think if people just stop purchasing for 2-3 Months then only the RE price will come to the actual Realistic price.
    Because of the High Margin In RE the No of Crime is also High. But at the end we end-consumer are paying the Money from our own pocket. This people had made 300-500% profit in each project. So the price has gone up. Now Re Dev dont wanna to digest the avg profit margin...
    I see in bangalore no Infrastructure in Many places but the land price are sky rocketing. I wish this Greedy Investor to suffer as our economy is slowing down.
    Today every ones jobs are in Risk. IT/AIRLINES/FIN/PHARMA/AUTO ...
    Its better to be safe.
    CommentQuote
  • People are not investing/Buying in RE in Mumbai . they are just waiting for the bubble to burst. As now the stock market has gone below 9K. Just someone this or other forum was saying that in 2009 the market will go down till 8700. it has happen now, in 2009 you will see it will be going down to a new level of 6000. and if you go to buy a flat with the builder he will only show you 2 flats in the whole building, wether all are empty he ll say all are sold out only these two are availaible. so dont bother about it. just wait. Cheers.

    (2009 will get lot of peoples their dream home.:)
    CommentQuote
  • better to buy completed prop?

    do u think its better to buy comepleted prop or under const from a financing view.also all this fuss abt prices coming down by any % doesnt hold much sense if one is an end user.if one bought a apt as end user at 4000 after correction and after 5 year even goes to just 6000 or 8000 one will not sell it bcoz then one will have to buy at 6k or 8k.so this so called uplift is only notional gain.same with prices going down today after 20% correction,if u can get a grade A apt in the right location with good quality and infra and can negotiate with the developed for another 5-7% drop and if its only apt makes sense to go ahead.lemme know yoour views
    CommentQuote
  • Knowing the current situation of the stock market is crucial especially if you have stocks invested in it. It is better to be up to dated to the situations so that you could know the actions to be taken if some changes in the stock market occur as to secure your stocks to lose. Today, the stock market is unstable so we need to be vigilant to the current market conditions.
    CommentQuote